Nov. 12 (Bloomberg) -- The yen strengthened against all 16 of the most-traded currencies, rising beyond 110 per dollar for the first time in 1 1/2 years, as investors reduced holdings of higher-yielding assets bought with loans in Japan.
The currency rose as much as 4.5 percent versus the Australian dollar and 2.2 percent against the euro as speculators retreated from so-called carry trades. Investors cut holdings of riskier assets after Morgan Stanley analysts downgraded HSBC Holdings Plc because of mortgage defaults and Deutsche Bank AG estimated that losses from falling values of subprime mortgages may reach $400 billion worldwide.
``We've seen the carry trade unwind on credit-market concerns,'' said Sue Trinh, a senior currency strategist in Sydney with RBC Capital Markets, the most accurate forecaster of the yen's value against the euro in the second quarter, according to data compiled by Bloomberg. ``The big beneficiary at the moment is the yen.''
The yen traded at 109.18 per dollar at 7:29 p.m. in New York, the highest since May 2006, from 110.69 late in New York on Nov. 9. It was at a two-month high against the euro at 159.01, from 162.48 late last week.
The dollar rose the most in three weeks against the euro to $1.4544, from $1.4678 late last week. It fell to $1.4752 on Nov. 9, an all-time low against the synthetic euro, a theoretical value that estimates where the currency would have traded before its inception. The prior record was $1.4557 set in 1992. Trading may be less than normal today because of the U.S. Veterans Day holiday.
Credit-Market Losses
Investors pared carry trades as concern grew about writedowns on securities tied to defaults on U.S. subprime mortgages. Shares of HSBC Holdings Plc, Europe's biggest bank by market value, fell to the lowest in almost three months after Morgan Stanley downgraded the stock on the view provisions for defaults will swell.
The credit market shakeout that started with the subprime- market collapse this year may force banks and brokers to write off up to $130 billion in writedowns and loan losses, Deutsche Bank AG said in a report today.
``The market has to realize this crisis isn't yet complete and that means a lot of these carry trades are at risk,'' said Hans-Guenter Redeker, head of currency strategy at BNP Paribas SA in London, and the most accurate foreign-exchange forecaster last quarter in a Bloomberg survey. ``We are running on fear this week. There is a lot of negative potential in the news.''
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