BLBG: Yen, Dollar Fall as Signs Recession Easing Damps Refuge Demand
The yen and the dollar fell as investors bet the U.S. economy is showing signs of recovery, sapping demand for the currencies as a refuge from the global financial turmoil.
The Japanese currency and the dollar dropped for a second day against the euro before a report analysts predict will show the U.S. economy shrank at a slower pace in the first quarter and after Siemens AG, Europe’s biggest engineering company, posted better-than-expected earnings. South Korea’s won led gains in Asian currencies after the nation’s current-account surplus widened to a record in March.
“Despite all the building risks, people are still willing to give sentiment the benefit of the doubt,” said Geoffrey Yu, a currency strategist in London at UBS AG, the world’s second- biggest foreign-exchange trader. “It should all be taken with a grain of salt. Things could turn sharply very quickly.”
The yen weakened 0.7 percent to 127.65 per euro as of 9:20 a.m. in London, from 126.79 in New York yesterday. Japan’s currency slid to 96.76 versus the dollar, from 96.45. The dollar declined 0.3 percent to $1.3193 per euro, from $1.3149.
The South Korean won rose 1.2 percent against the dollar to 1,340.75. The Malaysian ringgit strengthened 0.9 percent versus the greenback to 3.5945.
The volume of currency trading is likely to be less than normal because of a national holiday in Japan, said Sean Callow, senior currency strategist at Westpac Banking Corp. in Sydney.
Exports Surge
Japan’s currency snapped an eight-day winning streak versus the won after the Bank of Korea said the current-account surplus, the broadest measure of trade, swelled to $6.65 billion last month, almost doubling from February. New Zealand’s exports surged 17 percent from the prior month, the first back-to-back increase since December 2007, the statistics bureau said.
“Overall the data are slightly more positive,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “This is weighing on the yen and the dollar.”
The U.S. economy probably contracted at an annual rate of 4.7 percent in the first quarter, after shrinking 6.3 percent in the final three months of 2008, according to a Bloomberg News survey before the Commerce Department reports the figure today.
The Federal Reserve will keep its target lending rate in a range of zero to 0.25 percent at a meeting today, a separate Bloomberg survey showed. Policy makers will announce their decisions on interest rates and goals for purchases of Treasuries and mortgage securities at 2:15 p.m. in Washington.
Siemens Profit
Operating profit at Siemens’s main industry, energy and health-care units, referred to as “sector profit,” climbed to 1.84 billion euros ($2.43 billion) from 1.29 billion euros, the Munich-based company said today. Analysts in a Bloomberg survey predicted 1.65 billion euros.
DreamWorks Animation SKG Inc., the maker of ‘Shrek’ movies said first-quarter profit more than doubled on theatrical and home-video sales from “Madagascar: Escape 2 Africa.”
The better-than-expected earnings spurred gains in stock markets, with the Dow Jones Stoxx 600 Index adding 0.6 percent. Futures on the Standard & Poor’s 500 Index were 0.7 percent higher. The MSCI World Index rose 0.5 percent.
“Equity markets and stock futures are in positive territory,” said Masashi Kurabe, head of currency sales and trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in Hong Kong. “This is causing selling of the yen.”
‘Confusing Hints’
Gains in the euro may be tempered on concern disagreement is deepening among European Central Bank officials on the measures needed to combat the 16-nation region’s recession.
ECB Executive Board member Lorenzo Bini Smaghi said yesterday there are difficulties for the central bank in buying government bonds, suggesting he may share Bundesbank President Axel Weber’s views.
Weber has said he doesn’t favor cutting the benchmark rate below 1 percent and is against buying assets, while others such as Athanasios Orphanides of Cyprus don’t want to rule those options out. Fellow member Juergen Stark will speak today in Siegen, Germany, and Ewald Nowotny will speak in Vienna tomorrow.
“We’re getting somewhat confusing hints from the very large number of ECB members,” Westpac’s Callow said. “They have so many officials and they’re not speaking with one voice. We’re inclined to sell the euro on rallies.”
Investors raised bets in the past week the ECB will cut its 1.25 percent target lending rate at its next meeting on May 7. The implied yield on the three-month Euribor interest-rate futures contract for June delivery was at 1.28 percent today, compared with 1.36 percent a week ago.
