ForeX

April 23  — The euro rose against the dollar and the yen after Credit Suisse Group AG, the biggest Swiss bank by market value, said it returned to profit in the first quarter, spurring demand for higher-yielding currencies.

The yen fell against the Australian and New Zealand dollars as Asian stocks advanced after Credit Suisse’s earnings exceeded estimates. The euro also advanced before European reports today that economists say will show manufacturing and service industries improved for a second month, adding to evidence the euro area’s recession is easing.

“Asian stock markets, a gauge for risk aversion, rebounded following Credit Suisse’s earnings news,” Tomohiro Nishida, a foreign-exchange dealer at Chuo Mitsui Trust & Banking Co. in Tokyo. “The bounce back of stocks triggered buying of the euro and other higher-yielding currencies.”

The euro climbed to $1.3037 as of 7:48 a.m. in London from $1.3005 yesterday in New York after falling as low as $1.2980. It advanced to 127.72 yen from 127.48, after earlier weakening to 126.80. Japan’s currency was little changed at 97.967 per dollar from 98.01.

Japan’s Nikkei 225 Stock Average rose 1.4 percent and the MSCI Asia-Pacific Index of regional shares climbed 1.4 percent.

Credit Suisse announced a net income of 2 billion Swiss francs ($1.7 billion), compared with a 2.15 billion-franc loss a year earlier, the Zurich-based bank said in a statement. Earnings were twice the median estimate of analysts surveyed by Bloomberg News.

‘Highly Volatile’

The yen earlier gained versus all of the 16 most-traded currencies on speculation the U.S. government will uncover more losses at the nation’s banks when it releases results of its so- called stress tests on May 4

“Highly volatile price action is expected before the results of the ongoing stress test are announced,” said Yoshifumi Suzuki, a foreign-exchange dealer at Hachijuni Bank Ltd. in Tokyo. “If concerns about the credit crunch eases, then people may favor such currencies as the Aussie.”

Australia’s dollar rose to 69.48 yen from 69.14 yen yesterday, reversing a loss of as much as 0.7 percent. The New Zealand dollar climbed to 54.79 yen from 54.44 yesterday.

Japan’s currency had approached a three-week high against the dollar after Morgan Stanley, the fifth-biggest U.S. bank by assets, posted a larger-than-expected loss yesterday, and Wells Fargo & Co. Chief Financial Officer Howard Atkins said “credit may not have turned yet.” Bank of America Corp. also increased its loan-loss reserves this week.

Profit Trends

“While there is some improvement in profit trends at U.S. banks, it is far from clear if this positive flow will be sustained,” said Masashi Hashimoto, senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest lender.

The euro rose against 13 of the 16 most-active currencies before Markit Economics releases its composite index of Europe’s manufacturing and service industries. The index, which is based on a survey of purchasing managers, rose to 38.9 in April from 38.3 the previous month, according to a Bloomberg News survey.

“Most people are looking for a better PMI number,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “Signs that the euro-zone’s recession isn’t worsening would probably be supportive of the euro.”

April 22 — The yen rose against all 16 of the most-active currencies on speculation stress tests on the largest U.S. banks will show additional loan losses, boosting demand for the yen as a refuge from the global financial crisis.

Japan’s currency also advanced after a government report showed a slump in the nation’s exports slowed in March, ending a four-month streak of record drops and adding to signs the recession may have started to ease. Australia’s dollar slid against the greenback and the yen after a report showed the nation’s inflation rate fell to an 18-month low, giving policy makers more room to cut interest rates.

“Investors remain averse to taking on risk amid lingering worries over the financial turmoil,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. The yen was bought because it is a “safe-haven” currency, he said.

The yen climbed to 126.99 per euro as of 7:55 a.m. in London from 127.81 in New York yesterday, when it reached 126.09, the highest level since March 16. Japan’s currency advanced to 98.22 against the dollar from 98.73.

The dollar was at $1.2931 against the euro from $1.2948 in New York yesterday. It touched $1.2889 on April 20, the strongest since March 16.

Australia’s dollar declined to 69.20 U.S. cents from 71.14 cents in New York yesterday, and dropped to 69.20 yen from 70.24 yen. New Zealand’s dollar fell to 55.77 cents from 56.40 cents, and weakened to 54.58 yen from 55.66 yen.

The British pound fell to $1.4609 from $1.4673 before Chancellor of the Exchequer Alistair Darling delivers today a U.K. budget with what may be the biggest deficit on record.

Stress Tests

The yen headed toward a three-week high against the dollar after a regulatory official said the U.S. government’s stress tests on the 19 largest U.S. banks are increasingly focusing on the quality of loans the lenders made after finding wide variations in underwriting standards.

The Federal Reserve plans to release results of “stress tests” on banks on May 4. The tests are being used to determine whether the companies have enough capital to cover losses over the next two years should the recession worsen.

Worldwide losses tied to loans and securitized assets may reach $4.1 trillion by the end of 2010 as the recession and the credit crisis exact a higher toll on financial institutions, the International Monetary Fund said yesterday.

Japan’s currency also approached a five-week high versus the euro after a government report showed the nation’s overseas shipments slumped 45.6 percent from a year earlier, compared with February’s unprecedented 49.4 percent plunge. Economists predicted a 46.4 percent drop.

Australian Inflation

“Improvement in terms of trade could have a positive influence on the Japanese economy,” said Susumu Kato, chief economists at Calyon Securities in Tokyo. “The yen will be traded in a stable manner.”

Australia’s dollar fell toward a three-week low versus the dollar and the yen after the Bureau of Statistics said today annual inflation slowed, backing the case for the Reserve Bank of Australia to cut interest rates.

“With inflation working lower, they would be able to keep interest rates at low levels for a prolonged period,” said Savanth Sebastian, an economist at Commonwealth Bank of Australia in Sydney. “We are penciling in at least one more rate cut.”

Australia’s consumer price index rose 2.5 percent in the first quarter from a year earlier, after gaining 3.7 percent in the fourth quarter, the bureau said in Sydney.

U.K. Budget

The British pound fell on concern Darling’s U.K. budget will limit his ability to counter the worst recession since World War II. The shortfall this year may jump to 160 billion pounds ($232 billion), or 11 percent of gross domestic product, according to a survey of 24 economists conducted by the Treasury. Darling will announce his figures at 12:30 p.m. in London.

The euro traded near the lowest level in more than a month against the dollar on lingering concern disagreement is deepening among European Central Bank policy makers on measures needed to combat the recession in the region.

“The anxiety about disparity on policy action among ECB policy makers is still strong,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-largest lender. “This may continue to outweigh the impact of yesterday’s better-than-expected ZEW survey.”