BLBG: Yen Declines as Sugimoto Says Currency Moves May Hurt Economy
The yen weakened from an eight-week high against the dollar and dropped versus the euro after Japan’s Vice Finance Minister Kazuyuki Sugimoto said “excessive moves” in currencies may hurt the economy.
India’s rupee climbed the most in two decades on speculation Prime Minister Manmohan Singh’s election victory will support growth. The greenback dropped versus the Australian and New Zealand dollars and the South African rand after U.S. stocks advanced, reducing demand for the world’s main reserve currency as a haven.
“There’s verbal intervention out of Japan again, which checked the yen’s strength a bit,” said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank Ltd. in New York. “They are sending a signal that they are concerned about currency moves. Risky trades will be put back on again.”
The yen lost 0.7 percent to 95.85 per dollar at 11:30 a.m. in New York, from 95.21 on May 15, paring its gain this month to 2.9 percent. Japan’s currency earlier touched 94.55, the strongest level since March 20. The yen depreciated 0.8 percent to 129.46 per euro from 128.43. The euro traded at $1.3499, compared with $1.3495 last week.
India’s rupee jumped 3.1 percent to 47.9212 per dollar after touching 47.7700, the strongest level since Dec. 26, as Singh’s ruling Congress Party won the most seats since 1991, enabling the party to form a new government without the support of Communist lawmakers.
Outlook for Rupee
The rupee is likely to rally to 46 against the dollar in three months as economic changes are made, according to Royal Bank of Scotland Group Plc. Should Singh’s government lay out a road map for fiscal “consolidation,” the threat of a sovereign rating downgrade will diminish, wrote Sanjay Mathur, a Singapore-based analyst at RBS, in a research note today.
Australia’s dollar rose 1.2 percent to 75.80 U.S. cents, extending its advance in the past month to 4.9 percent after the Standard & Poor’s 500 Index climbed 1.5 percent today. New Zealand’s dollar increased 0.7 percent to 58.93 cents and was up 3.8 percent from a month earlier. The rand appreciated 0.6 percent to 8.6560 per dollar.
The Dollar Index, used by the ICE to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, fell 0.2 percent to 82.879.
Japan’s currency dropped 2.2 percent to 46.08 versus the Brazilian real, 2 percent to 72.79 against the Australian dollar and 1.4 percent to 11.09 versus the rand as Sugimoto told reporters in Tokyo today that bolstering the economy is now the government’s “top priority.”
Japan’s currency gained 9.2 percent versus the dollar since the collapse of Lehman Brothers Holdings Inc. last September as investors sought refuge from global financial turmoil.
‘Excessive Moves’
“Excessive moves in currencies are undesirable as they would have a negative effect on the Japanese economy,” Sugimoto said. “We’ll continue to monitor currency markets.”
The yen extended declines after Japan’s local and foreign- currency debt ratings were brought to the same level, Aa2, by Moody’s Investors Service to reflect that the repayment risk for each is equal.
Waning global sales and a stronger currency hurt Japan’s exporters this year. Toyota Motor Corp. expects global sales to fall by 1.067 million vehicles to 6.5 million in the year ending March 31 and is predicting another annual loss.
The pound advanced 0.8 percent to $1.5305 and 0.7 percent to 88.28 pence per euro as sterling’s 22 percent drop against the dollar in the past year made it attractive to investors. Investors from Millennium Asset Management to Mellon Capital Management Corp. are betting the pound’s losses are ending.
Euro Versus Pound
Europe’s currency may fall against the pound, weakening to 88 pence this week and 84 pence by year-end, according to Commerzbank AG.
The euro dropped 1 percent versus the dollar and 0.7 percent versus the pound last week after the European Union’s statistics office said on May 15 that gross domestic product of the 16 nations that use the euro contracted 2.5 percent in the first quarter, the most in at least 13 years.
“Friday’s nasty euro-zone GDP data and the associated foreign-exchange moves were a firm reminder that so far there is less negative news priced into the euro than into other European currencies,” a Commerzbank team led by Ulrich Leuchtmann in Frankfurt wrote in a report. “Against this background, the upside in euro-pound remains capped to the 90 pence area.”
The European Central Bank’s monetary policy is increasingly stabilizing the economy, said Axel Weber, a Governing Council member, in a speech in Dusseldorf today. The central bank announced a plan on May 7 to buy 60 billion euros ($80.6 billion) of covered bonds to help keep borrowing costs down.
“I don’t see a major run on the dollar,” said Alan Ruskin, head of international currency strategy in North America at RBS in Greenwich, Connecticut. “From a cyclical standard point of view, the market won’t embrace the euro.”
The dollar will underperform some emerging-market currencies because their assets are “cheap,” Ruskin said.
