The yen rose, snapping a three-day slide against the dollar and the euro, on speculation Japanese exporters bought the currency to settle month-end accounts.
The yen gained against 13 of the 16 most-active currencies as Japanese companies judged a decline to a two-week low provided an attractive level to buy. The currency also benefited as a report on Aug. 24 showed more bets on a yen advance than a loss in the futures market for the first time since June 2006.
``Japanese exporters are buying the yen,'' said Nobuaki Tani, a client manager of the Market Trading Office at Resona Bank Ltd. in Tokyo. ``Some of them are still lagging behind in their yen purchases and the currency dropped to cheap levels.''
The yen traded at 158.93 per euro at 12:16 p.m. in Tokyo from as low as 159.68 in early trading and 159.26 in New York on Aug. 24. It also was at 116.26 yen from 116.44. The yen may advance to 158.00 per euro and 115.80 versus the dollar today, Tani said. Moves were exaggerated as some speculators avoided taking positions because of a public holiday in the U.K. today.
The yen got an added boost as futures traders reversed bets it will drop against the dollar, figures from the Washington- based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs -- was 1,516 on Aug. 21, compared with net shorts of 21,889 a week earlier. Hedge funds swung to net long positions as they unwound investments in the higher-yielding dollar funded with borrowed yen, known as the carry trade.
Net Longs
``The yen carry trade isn't the one-way bet that it used to be,'' said Tokichi Ito, deputy general manager of foreign exchange at Trust & Custody Services Bank Ltd. in Tokyo. ``Some speculators may look for the yen to gain against the dollar. You can't expect everyone who's been burned during the yen's appreciation to immediately rush back to yen selling.''
The yen may move between 116.30 and 117.20 against the dollar today, he said.
The Australian dollar gained to 96.52 yen from 96.33, the New Zealand dollar advanced to 84.27 yen from 84.01 as rising stocks lured investors back to carry trades.
``The yen will head south,'' said Saburo Matsumoto, senior manager of foreign exchange sales at Sumitomo Trust & Banking Co. in Tokyo. ``Rising share prices are likely to give further momentum to the yen carry trade.''
The yen may weaken to 117 per dollar and 160 per euro today, Matsumoto said.
Japan's Cabinet
Japan's 0.5 percent interest rate has given investors the opportunity to borrow yen and buy higher-yielding currencies overseas. Australia's benchmark is 6.5 percent and New Zealand's is 8.25 percent.
Sumitomo Trust's Matsumoto said there will also be pressure for the yen to weaken as Prime Minister Shinzo Abe will focus on winning political support when he reshuffles his Cabinet today.
``This will reduce expectations of Japan's financial and structural reforms, especially among overseas investors, leading to yen-selling,'' Matsumoto said.
Abe tapped his foreign minister and a former land minister to lead his Liberal Democratic Party and will name a new Cabinet today, after the LDP was routed in elections last month.
Abe named Taro Aso, 66, as the party's secretary general and Nobuteru Ishihara, 50, a former land minister, as policy council chairman. Toshihiro Nikai, 68, a former trade minister, was named chairman of the general council.
European Rates
The euro may advance against the dollar on speculation European Central Bank President Jean-Claude Trichet will signal the region's economy is strong enough to withstand an interest- rate increase to contain inflation. Trichet speaks at 3 p.m. in Budapest.
The currency may gain for a fourth day against the dollar as investors raised bets the ECB will increase the benchmark rate from 4 percent when it meets on Sept. 6. The ECB on Aug. 22 said it was sticking to a policy stance expressed by Trichet on Aug. 2, when he pledged ``strong vigilance'' on inflation, a phrase that has signaled each of the eight rate increases since late 2005.
``The ECB has a history of signaling rate increases to the market and they will follow through,'' said Matthew Jones, a currency strategist at Travelex Australasia Group in Sydney. ``Inflation is still a concern. The euro will push up to the $1.37 level.''
Goldman Sachs Group Inc. and Merrill Lynch & Co. increased their year-end forecasts for the euro as much as 6 percent last week as concern the rout in subprime mortgages will erode European bank earnings abated.
Citigroup Inc. says the euro may rise to $1.42 by the end of the year from $1.3675 on Aug. 24. It was last quoted at $1.3669 from $1.3675.
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