Yen Gains

The yen rose for a third day against the euro as concern the global recession will worsen helped push down Asian shares and U.S. stock futures.

“Worries that Europe’s response to its recession is lagging behind other countries is causing risk aversion,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The yen is being bought and may strengthen” to 127.55 per euro and 98.51 against the dollar today, he said.

Japan’s Nikkei 225 Stock Average fell 0.7 percent and the Standard & Poor’s 500 Index futures dropped 0.8 percent.

Dollar Index

The Dollar Index climbed for a fifth day, its longest run of gains since January, before the Conference Board releases its index of leading U.S. economic indicators today. The gauge fell 0.2 percent in March, after dropping 0.4 percent in February, according to a Bloomberg survey of economists.

President Barack Obama said yesterday he will demand “accountability” from any U.S. banks that require additional taxpayer money following “stress tests” being conducted by regulators. The tests are being used to determine whether the companies have enough capital to cover losses over the next two years should the economic recession worsen.

“The policies being taken by the Obama administration are fast and comprehensive and there are signs the recession there is waning,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “This is positive for the dollar.”

The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, rose to 86.083 from 85.981.

Lower Volatility

Gains in the yen may be tempered after the JPMorgan Chase & Co. benchmark index of investor expectations for currency swings dropped to a six-month low of 14.4 percent on April 17.

Lower currency volatility indicates smaller exchange-rate fluctuations that can erode profit on so-called carry trades. This strategy involves borrowing funds in countries with lower interest costs, such as Japan, and investing them in nations with higher rates, allowing investors to pocket the difference.

“Big currency moves are behind us,” said Maxime Tessier, chief of foreign exchange at Montreal-based Caisse de Depot et Placement du Quebec, Canada’s biggest pension fund manager, with C$120 billion ($98.6 billion) in assets. “The volatility spike has to unwind itself over time. Selling volatility has been the winning trade so far this year and will continue to work well.”

The benchmark interest rate is 0.1 percent in Japan and as low as zero in the U.S., compared with 3 percent in Australia and in New Zealand.

The Korean won fell against the dollar and the yen as importers took advantage of its recent gains to convert funds into dollars. The currency rose 5.3 percent in the past month as overseas investors increased bets on emerging-market assets amid signs the global recession is easing.

“There are not a small amount of import deals coming in,” said Roh Sang Chil, a currency dealer at Kookmin Bank in Seoul. “But the won is supported as foreigners remained net buyers of stocks, supplying the market with foreign exchange.”