Yen advances with aussie as last year’s declines seen excessive

The yen and Australian dollar, the two worst-performing major currencies last year, headed for the biggest weekly increases in at least two months on speculation their recent declines were too rapid.

The U.S. dollar is poised for its largest five-day gain since November versus the euro (FOREX:EURUSD) after Federal Reserve Chairman Ben S. Bernanke said the headwinds that have held back the U.S. economy may be abating. Japan’s currency advanced for a second day versus the shared currency amid bets the nation’s investors will buy yen as they repatriate earnings. New Zealand’s dollar posted the biggest gain in three months.

“We’re seeing profit-taking going on in the market right now at levels we haven’t seen in several weeks,” Ravi Bharadwaj, a Boston-based senior market analyst at Western Union Business Solutions, a unit of Western Union Co., said in a phone interview. “Yen repatriation flows are likely to continue into the end of the month.”

The yen was little changed at 104.76 per dollar (FOREX:USDJPY) at 3:42 p.m. New York time, and is up 0.4% this week, the most since the period ended Oct. 18. It slid to 105.44 yesterday, the weakest since October 2008. Japan’s currency gained 0.6% to 142.37 per euro. The euro fell 0.6% to $1.3602, having fallen 1.2% this week.

Australia’s dollar climbed (FOREX:AUDUSD) 0.5% to 89.54 U.S. cents after adding as much as 1.1%, the biggest advance since Oct. 1. It has jumped 1% this week, set for the first five-day gain since the period ended Oct. 18.

Kiwi, Real

New Zealand’s dollar advanced versus all 16 major counterparts amid speculation the Reserve Bank of New Zealand will raise its benchmark interest rate at a Jan. 29 meeting. The currency appreciated 1.2% to 82.79 U.S. cents after increasing 1.6%, the most since Sept. 18.

“I would not rule out a rate hike, which most expect in March,” Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co., said in a phone interview.

The Brazilian real climbed for the first time in four days on speculation Finance Minister Guido Mantega will cite improved fiscal prospects when he comments on the budget today. The currency increased 0.5% to 2.3765 per dollar after rising 0.8%, the most since Dec. 23.

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