Yen Strengthens on Concern Credit Losses May Increase in Europe

July 6 (Bloomberg) -- The yen strengthened against the euro and the dollar on concern credit-market losses will keep increasing in Europe, spurring demand for the relative safety of Japan’s currency.

The yen gained versus all of the 16 most-active currencies on speculation Asian stocks will drop, prompting investors to cut holdings of higher-yield assets. The euro and the dollar fell after Russian President Dmitry Medvedev said the world is too reliant on the currencies, damping the appeal of European and U.S. assets. Germany’s IKB Deutsche Industriebank AG said it lost 580 million euros ($809 million) in the fiscal year ending March 31 as the value of its investments fell.

“The IKB news is a reminder there are still financial problems in Europe that imply the region may not be so safe” for investments, said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “It’s a negative for the euro and a positive for the yen.”

The yen advanced to 133.85 per euro as of 8:50 a.m. in Tokyo from 134.26 last week in New York. Japan’s currency rose to 95.90 per dollar from 96.04. The dollar traded at $1.3957 per euro from $1.3980.

The yen may strengthen to 133.58 per euro and 95.50 against the dollar today, Soma said.

Last Updated: July 5, 2009 19:54 EDT