BLBG: Yen Rises Against Euro as Loss in Jobs Spurs Safety Demand
The yen rose against the euro as U.S. companies eliminated more jobs last month than forecast and Europe’s unemployment rate increased in February to the highest level in almost three years, spurring demand for safety.
Europe’s currency slid to the lowest level in two weeks against the pound after a report indicated German retail sales unexpectedly dropped in February and Europe’s manufacturing contracted last month more than previously estimated.
“There’s very, very little risk in the market,” said Sebastien Galy, a currency strategist at BNP Paribas Securities SA in New York. “The labor market is going to get worse, credit risk is going to get worse, realized risk is going to get worse.”
The 16-nation euro dropped 0.5 percent to 130.53 yen at 9:34 a.m. in New York, from 131.13 yesterday. The euro was at $1.3249, compared with $1.3250, after touching $1.3114 on March 30, the lowest level since March 18. Against the pound, the euro fell 0.2 percent to 92.34 pence after touching 91.55, the lowest level since March 16. Japan’s yen gained 0.5 percent to 98.52 per dollar from 98.96. It earlier reached 99.47, the lowest level since March 5.
The euro region’s jobless rate increased in February to 8.5 percent, the highest level since May 2006, the European Union’s statistics office said in Luxembourg today. The median forecast of 23 economists surveyed by Bloomberg was 8.3 percent.
“We’ll continue to see the euro’s outlook being predicated toward lower levels,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International. “Ongoing signs of the euro area’s fragility will keep the market pinned down.”
Europe’s Manufacturing
An index of European manufacturing based on a survey of purchasing managers by Markit Economics was 33.9 in March, below the initial estimate of 34. A reading below 50 indicates contraction.
German retail sales, adjusted for inflation and seasonal swings, decreased 0.2 percent in February, the Federal Statistics Office in Wiesbaden said. The median forecast of economists in a separate survey was an increase of 0.3 percent.
The European Central Bank will lower the main refinancing rate by a half-percentage point to 1 percent tomorrow, according to the median forecast of 55 economists surveyed by Bloomberg. ECB council member Axel Weber said in March that the central bank shouldn’t cut borrowing costs below that level.
The drop of 742,000 in the ADP Employer Services’ gauge of U.S. company jobs was the most since records began in 2001. The median forecast of 30 economists surveyed by Bloomberg was 663,000 fewer jobs.
Tankan Survey
The yen fell earlier to the lowest level in almost four weeks against the dollar after the Bank of Japan’s Tankan survey of sentiment among large manufacturers slumped to minus 58 in March from minus 24 in December. The median forecast of economists surveyed by Bloomberg was a reading of minus 55.
“Japan seems to be taking the hit in terms of their economy a lot worse than other countries,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest interdealer broker. The Tankan survey “absolutely highlights the reason why we should be getting out of the yen.”
The yen tumbled 8.4 percent against the dollar in the first quarter, the worst performance since the last three months of 2001, and weakened 3.4 percent versus the euro, the first quarterly drop since June.
The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, was little changed today after a fourth consecutive quarterly gain, the longest stretch of advances since 2005.
Contracts to buy previously owned homes in the U.S. were unchanged in February after a 7.7 percent drop in the previous month, according to the median forecast of 37 economists surveyed by Bloomberg News. A report from the National Association of Realtors is due at 10 a.m. New York time.
