BLBG: Yen Weakens Most in Three Weeks on Fed; Banks Lead Stocks Lower
The yen fell the most in three weeks against the euro as investors bought higher-yielding assets after the Federal Reserve signaled improved prospects for an economic recovery. European stocks declined.
Japan’s currency weakened as much as 1.1 percent against the euro at 12:33 p.m. in London, the biggest decline since June 1, and fell as much as 0.9 percent versus the dollar. The Dow Jones Stoxx 600 Index of European shares slid 1.1 percent after the International Monetary Fund described Ireland’s economic slump as “unprecedented.”
While the Fed disappointed some investors by declining to boost asset purchases as a way of lowering market interest rates, policy makers said they see a “gradual resumption of sustainable” growth. Japanese investors bought more securities abroad than they sold for a seventh week, a government report showed today.
“Risk indicators are looking better,” said Beat Siegenthaler, the chief emerging-markets strategist at TD Securities in London. “There is limited enthusiasm but things are better.”
The Federal Open Market Committee, led by Chairman Ben S. Bernanke, maintained its $1.75 trillion program to buy mortgage debt and Treasuries through so-called quantitative easing. “The prices of energy and other commodities have risen of late,” the Fed said after a two-day meeting in Washington. “However, substantial resource slack is likely to dampen cost pressures, and the committee expects that inflation will remain subdued for some time.”
Treasury Yields
The message failed to stop Treasury yields from rising. The 10-year rate rose five basis points, the most in almost a week. The yield was little changed at 3.68 percent today, up from a record low 2.055 percent on Dec. 30. The Treasury will sell $27 billion of seven-year notes today, completing this week’s record $104 billion of auctions.
The yen weakened to 134.42 per euro, after falling to 134.82. It depreciated to 96.34 per dollar, from 95.66. Japan’s currency slid 0.8 percent to 76.83 versus Australia’s dollar and weakened 0.4 percent to 61.47 per New Zealand dollar.
The Swiss franc declined 0.2 percent to 1.5326 per euro after being little changed earlier. Foreign-exchange traders said the Zurich-based Swiss National Bank intervened twice yesterday to limit the franc’s gains, driving the franc down the most in three months versus the U.S. and single European currencies. Nicolas Haymoz, a spokesman for the SNB, declined to comment on whether the bank sold francs today.
Irish Banks
Europe’s Stoxx 600 retreated for the third time in four days after the Washington-based IMF said Irish banks face as much as 35 billion euros ($49 billion) of losses through 2010. Dublin-based Bank of Ireland Plc tumbled 7.8 percent after the IMF said Ireland “is in the midst of an unprecedented economic correction.”
Paris-based Credit Agricole SA sank 3.8 percent after Cheuvreux and Kepler Capital Markets reduced their profit estimates for France’s second-biggest bank. Zurich-based Swiss Life Holding AG slid 3.8 percent after Bank of America Corp. advised selling shares of Switzerland’s largest life insurer.
The Frankfurt-based European Central Bank yesterday agreed to lend banks 442 billion euros for 12 months, the most ever allotted in an auction, to unblock credit markets in the 16- nation euro region.
“We may be six months away from Christmas but it came early for European banks,” London-based analysts at Evolution Securities led by Gary Jenkins wrote in a note today. “Whether or not the cash will find its way into the wider economy directly via bank lending to companies is a moot point.”
GDP Report
U.S. stock futures were little changed before the release of revised figures from the Commerce Department on first-quarter gross domestic product. The economy shrank at a 5.7 percent pace in the first three months of the year, capping the worst six- month performance in five decades, according to the median estimate of 72 economists survey by Bloomberg.
An index of U.S. home prices in 25 metropolitan areas rose in April for the first time since peaking in June 2007, a report released today by Radar Logic Inc. showed. Its RPX Composite Index, which measures the price per square foot of residential properties in and around major cities, increased 1.2 percent from March.
South Korea’s Kospi Index climbed 2.1 percent, the most in two weeks, after the government said the economy will shrink 1.5 percent this year, less than the 2 percent contraction it forecast in April.
The MSCI Emerging Markets Index, benchmark for equities in 22 developing nations, rose 0.5 percent as gains in Asia offset a retreat in eastern Europe. Russia’s Micex index slid 2.2 percent as falling metals dragged down mining companies including OAO GMK Norilsk Nickel.
