BLBG: Yen Drops Against Euro as Recovery Signs Damp Demand for Safety
By Paul Dobson and Ron Harui
May 13 (Bloomberg) -- The yen weakened for a second day against the euro as signs the global economy is recovering damped demand for Japan’s currency as a refuge.
The yen slipped against 15 of its 16 major counterparts as stocks rose and economic data pointed to improving employment in Australia and the U.S. The euro snapped a two-day decline against the dollar on speculation European policy makers will step up efforts to combat the region’s fiscal crisis. The Swiss franc strengthened to near a record against the euro.
“There’s plenty of reason for cheer about growth worldwide,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “Risk appetite is returning, which may lead to weakness in the yen and strength in currencies such as Australia’s dollar.”
Japan’s currency fell to 117.74 per euro as of 9:34 a.m. in London from 117.62 in New York yesterday. The euro rose to $1.2622 from $1.2614. It slid to $1.2529 on May 6, the weakest level since March 5, 2009, amid concern a widening sovereign- debt crisis would trigger the common currency’s collapse. The yen was at 93.36 per dollar from 93.24.
The franc was at 1.4026 per euro, after strengthening earlier to 1.4007, near the record low of 1.4006 it reached on May 6.
Australian employers added 33,700 jobs in April, the statistics bureau reported in Sydney today. Economists surveyed by Bloomberg News forecast a 22,500 gain. U.S. initial jobless claims fell 4,000 to 440,000 last week, a separate survey showed before today’s report.
‘Slightly Positive’
“The jobs numbers were mixed to slightly positive,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “There has been a slightly positive reaction in the currency, which reflects that kind of characterization of the data.”
Australia’s currency gained 0.8 percent to 90.08 U.S cents and 1 percent to 84.11 yen. New Zealand’s dollar rose 0.8 percent to 71.86 U.S. cents and 0.9 percent to 67.09 yen.
New Zealand’s manufacturing index increased to 58.9 in April from 56.7 in March, Bank of New Zealand Ltd. and Business New Zealand, a Wellington-based employer group, said on the group’s Web site today. A reading above 50 indicates that manufacturing is expanding. The index is at its highest since December 2004.
South Korea’s won led Asian currencies higher as the MSCI Asia Pacific Index of regional shares gained 1.7 percent, supporting demand for higher-yielding assets.
The won rose 1.4 percent to 1,128.10 per dollar. The currency has strengthened 3.2 percent this year as overseas investors plowed $7.6 billion into the nation’s stocks.
Euro-Zone Economy
The euro was supported after Portugal got more demand yesterday at a sale of 1 billion euros ($1.3 billion) in bonds than in previous auctions.
Spain’s Socialist Prime Minister Jose Luis Rodriguez Zapatero reversed an earlier commitment and cut public wages, acceding to pressure from the rest of Europe to reduce spending. European Union officials agreed to an almost $1 trillion lending package this week to keep Greece from defaulting and stem a rout in government debt that jeopardized the ability of Spain and Portugal to borrow.
“Worries over Europe’s fiscal problems appear to be easing a bit, given recent policy steps,” said Yuji Saito, director of the foreign exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “We may see buying of the euro as long as Asian equities gain.”
European Central Bank President Jean-Claude Trichet said the bank’s decision to buy government bonds to combat Europe’s fiscal crisis won’t increase money supply.
ECB Officials
“We are not engaging in quantitative easing,” Trichet said on France’s LCI TV yesterday. “We will take back all liquidity that we are adding.”
ECB Executive Board member Jose Manuel Gonzalez-Paramo will speak at a conference in Valencia, Spain today.
The 16-nation region’s gross domestic product rose 0.2 percent in the first quarter from the last three months of 2009, when it remained unchanged, data showed yesterday. Economists had forecast growth of 0.1 percent.
The euro has lost 8.4 percent this year, according to Bloomberg Correlation-Weighted Indexes. The dollar has gained 5.1 percent, and the yen has advanced 4.7 percent.
The euro may tumble back to its starting level of $1.18 in January 1999 by next month as widening deficits in the European Union jeopardize the single currency’s status, according to Sumitomo Mitsui Banking Corp.
The euro’s emergence as an alternative to the dollar as a major currency is in doubt because none of the European member states “follow budget deficit rules set by the Maastricht Treaty,” said Daisuke Uno, chief strategist at the unit of Japan’s third-largest banking group. The treaty stipulates that EU states should keep their budget deficits within 3 percent of gross domestic product.
“The time has come to reconsider the status of the euro,” Uno said. “The currency needs to go back to the drawing board and start over.”
To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net. Paul Dobson in London at pdobson2@bloomberg.net
