Yen Rises on Speculation Asian Stocks Will Extend Global Slump

The yen rose to a seven-week high against the euro on speculation Asian stocks will extend a global equity slide amid concern that U.S. financial institutions will incur more losses.

Japan’s currency gained versus all of its 16 major counterparts after CIT Group Inc. said it is deferring interest payments on subordinated bonds due in 2067 because efforts to cover the payments have been unsuccessful. The euro was close to a two-week low versus the dollar after German Finance Minister Peer Steinbrueck said financing conditions may deteriorate when the nation’s economy recovers.

“There are lingering worries about the health of the U.S. banking sector,” said Toshihiko Sakai, head of trading for foreign exchange and financial products at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. “The bias is for the yen and the dollar to be bought.”

The yen advanced to 131.51 per euro as of 8:45 a.m. in Tokyo from 132.19 in New York yesterday, after earlier reaching 131.46, the highest level since July 15. Japan’s currency rose to 92.55 per dollar from 92.92.

The euro traded at $1.4208 from $1.4224 in New York yesterday, when it touched $1.4178, the weakest level since Aug. 19. The British pound declined to $1.6124 from $1.6160.

Japan’s currency strengthened for a seventh day versus the euro after the Standard & Poor’s 500 Index fell 2.2 percent yesterday. U.S. banks on the West Coast still face credit deterioration and higher loan losses, said analysts at RBC Capital Markets.

Bank Reserves

“Many of these banks may still not have enough capital and reserves” to cushion against writedowns from worsening real estate market, analysts Joe Morford and David King wrote in a research report.