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The yen advanced versus all of its 16 major counterparts as Asian stocks fell and on the prospect that Japanese companies will bring home overseas earnings before the fiscal year ends this month. The dollar fell to weakest since December against the yen as traders added to bets the Federal Reserve will keep interest rates near zero to sustain growth in the world’s largest economy.

“Given underlying Greece woes, the ECB is unlikely to become proactive about exit strategies,” said Akane Vallery Uchida, a currency strategist at Royal Bank of Scotland Group Plc in Tokyo. “The euro may struggle in extending gains as it comes closer to $1.38-1.4 levels.”

The euro dropped to $1.3665 as of 6:30 a.m. in London from $1.3697 in New York yesterday, when it climbed to $1.3736, the strongest since Feb. 17. The 16-nation currency slipped to 120.52 yen from 121.17. The yen gained to 88.22 per dollar from 88.47, after earlier rising to 88.17, the highest since Dec. 10.

‘May Not Survive’

The euro slumped 8 percent in the past three months against the dollar and billionaire investor George Soros said on Feb. 28 that the currency “may not survive” the crisis.

Europe’s currency snapped a two-day advance against the yen after German Chancellor Angela Merkel said a meeting tomorrow with Greek Prime Minister George Papandreou won’t be “about aid commitments.”

Merkel faces domestic opposition to tapping taxpayers to extend a financial lifeline to Greece. The Greek federation of civil servants unions, which plans a 24-hour strike on March 16 against the government’s austerity measures, said it will hold a protest march in Athens today.

“Given the lukewarm reaction from its allies, investors argue whether or not Greece can win actual financial aid from other EU members,” said Minoru Shioiri, chief manager of currency trading in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest publicly traded bank by market value. “There is also worry about social unrest in Greece, making it harder for the euro to regain investor confidence immediately.”

Yen Gains

The yen strengthened on speculation Japanese companies will bring home overseas earnings before the fiscal year ends.

Large Japanese manufacturers expect the yen to average 91.16 per dollar in the six months to March 2010, according to the Bank of Japan’s quarterly Tankan survey.

“The decline in the euro appears to have caught many exporters unawares,” Naomi Fink, Japan strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo, wrote in a research note today. “Importers appear less damaged by the slump in global demand. Many of them appear willing to repatriate some of their overseas-earned profits.”

The dollar fell for a third day against the yen on speculation job losses in the U.S. will prompt the Fed to keep borrowing costs unchanged.

Futures on the Chicago Board of Trade yesterday showed a 39 percent chance the Fed will keep its target lending rate at between zero and 0.25 percent by its November meeting, compared with 19 percent odds a month earlier.

“As long as job losses continue, the Fed can’t start hiking interest rates,” said Kazutoshi Yasuda, general manager of the markets department in Tokyo at FX Prime Corp., a foreign- exchange unit of Japanese trading house Itochu Corp. “This rate view will keep a lid on the dollar.”

source:businessweek.com