BLBG: Yen Rises to Three-Week High as U.S. Jobless Claims Increase
By Ye Xie and Jamie McGee
Nov. 20 (Bloomberg) -- The yen rose to a three-week high against the dollar and advanced versus the euro as a surprise increase in U.S. initial jobless claims prompted bets investors will sell higher-yielding assets.
The Swiss franc fell to the lowest against the dollar since July 2007 after the central bank unexpectedly halved its target lending rate to 1 percent. South Korea's won was the biggest loser, tumbling to the weakest level in more than 10 years as the global recession reduced demand for emerging-market assets.
``Risk appetite won't recover any time soon,'' said Robert Blake, a senior currency strategist in Boston at State Street Global Markets LLC, which has $15.3 trillion in assets under custody. ``We are in a deep recession, and it has a long way to go. The yen is the biggest safe-haven currency.''
The dollar dropped 0.8 percent to 95 yen at 11:40 a.m. in New York, from 95.73 yesterday. It touched 94.29, the lowest since Oct. 28. The 15-nation euro declined 0.5 percent to 118.94 yen from 119.55. It rose 0.2 percent to $1.2516 from $1.2489.
First-time claims for U.S. unemployment insurance unexpectedly rose last week to the highest level since 1992. The number of people staying on benefit rolls in the prior week rose to 4.012 million, the most since December 1982, the Labor Department reported today.
The yen increased 3.8 percent to 58.69 against the Australian dollar and 2.1 percent to 8.92 versus South Africa's rand on speculation investors will unwind carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.3 percent target lending rate compares with 5.25 percent in Australia and 12 percent in South Africa.
Currency Volatility
Volatility implied on dollar-yen options expiring in one month, a measure of expectations for future currency moves, climbed to 26.19 percent from 24.74 percent yesterday. It reached 41.79 percent on Oct. 24, the highest since Bloomberg began compiling data in December 1995. Higher volatility can discourage carry trades by making profits harder to predict.
``Massive unwinding is still ongoing,'' said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. ``People are going after the safe haven.''
The Standard & Poor's 500 Index dropped 1.6 percent on the jobs data after tumbling yesterday to its lowest close since March 2003. Europe's Dow Jones Stoxx 600 Index fell 3.5 percent.
``What we are primarily seeing is widespread weakness in equity markets,'' said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York.
Drop in Won
The won slid, breaking through 1,500 per dollar for the first time since 1998, as South Korean stocks fell for an eighth day, the longest losing streak since 2003. The currency dropped to as weak as 1,522.50 per dollar.
The franc slipped for a sixth day against the dollar as the Swiss National Bank reduced its target for the three-month London interbank offered rate, or Libor, to 1 percent and promised a ``generous and flexible'' supply of francs. The Swiss currency touched 1.2228 against the dollar, the weakest level in almost a year and a half. The franc fell 0.8 percent to 1.5284 versus the euro.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Jamie McGee in New York at jmcgee8@bloomberg.net
