Yen, Franc Gain on Credit Losses, Rising Money-Market Rates

Dec. 4 (Bloomberg) -- The yen and Swiss franc rose against currencies from Brazil, Australia and South Africa as global credit-market losses prompted investors to sell higher-yielding assets funded by borrowing in Japan and Switzerland.

The costs of short-term loans in the dollar, euro and pound increased as banks hoard cash on concern that losses stemming from U.S. subprime mortgages will spread. The euro gained the most in two weeks versus the dollar and advanced against the pound after a report showed prices producers paid in Europe rose at the fastest pace this year.

``There is still a lot of uncertainty in the credit markets and liquidity in money markets is drying up,'' said Mike Moran, a senior currency strategist at Standard Chartered Plc in New York. ``The tone leading into the end of the year remains cautious. Investors are likely to continue to cut their exposure to risky assets if the credit conditions don't get any better.''

The yen advanced to 109.93 per dollar at 2:22 p.m. in New York from 110.46 yesterday. The dollar declined to $1.4757 per euro from $1.4667. The U.S. currency dropped to a record low of $1.4967 per euro on Nov. 23. The euro strengthened to 162.22 yen from 162.01. The Swiss franc increased to 1.1175 per dollar from 1.1273. The pound weakened to $2.0562 from $2.0659.

The dollar may fall to $1.50 against the euro by the end of the month, according to Moran.

Canada's dollar declined against 16 most-actively traded currencies after the Bank of Canada cut its benchmark interest rate a quarter-percentage point to 4.25 percent. It was the second central bank among the Group of Seven nations to cut borrowing costs following two reductions from the Federal Reserve since September.

Canadian Dollar Declines

The Canadian dollar fell to 98.77 U.S. cents, touching 98.49 cents, the weakest since Sept. 20. The Canadian currency has dropped from $1.1040 on Nov. 7, the highest level since it was floated by the BOC in 1950.

The euro rose the most in almost three weeks against the pound to 71.77 pence after factory-gate prices in the euro zone increased 3.3 percent from a year earlier in October, the most since December 2006. It reduced speculation the European Central Bank needs to cut interest rates from 4 percent.

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