FR: Euro snaps 6-week drop vs yen as risk appetite rises
The euro ended its longest stretch of weekly losses against the yen since the shared currency was created as investor appetite for riskier assets improved on signs Europe’s debt crisis is unlikely to derail global growth.
The yen fell against 15 of its 16 most-traded counterparts as stock and oil gains boosted demand for currencies linked to growth. Data showed economic expansion in Asia is accelerating. Expectations for future volatility among major currencies fell to a three-week low even as the euro swung between gains and losses over the past five days. US consumer prices fell for a second month in May, a report next week is forecast to show.
“Good economic data reassures the market that even though the euro zone has a host of problems, the impact on growth may be offset by the currency and Europe’s growth might not be as bad as people thought,” said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. “China’s growth, though dented by Europe, hasn’t been derailed, and that’s good for risk appetite.”
The euro rose 0.9 percent against the Japanese currency, its first weekly gain after six straight weeks of losses, the longest stretch since 1999, to ¥111, from ¥109.98 on June 4. The shared currency gained 1.2 percent to $1.2112, from $1.1967 on June 4. The greenback bought ¥91.65, down 0.3 from ¥91.90. Australia’s dollar climbed 3.3 percent to 85.03 US cents, after falling 2.8 percent in the five days ended June 4.
The Standard & Poor’s 500 Index increased 2.5 percent, the biggest weekly gain since March, after falling for two of the past five days. The MSCI World Index advanced 1.9 percent. Crude oil for July delivery increased 3.2 percent to $73.78 a barrel in New York.
Implied volatility among major developed currencies fell 1.6 percentage points this week to 13.24 percent, retreating from an increase that took the measure for future price swings to a 13-month high of 16.95 percent on May 20, according to a JPMorgan Chase & Co. index.
US consumer confidence rose in June to the most in more than two years, according to the Thomson Reuters/University of Michigan index released. It gained to 75.5 from 73.6 in May, beating a Bloomberg survey forecast for a gain to 74.5.
China’s exports jumped the most in six years in May and property prices rose at a near-record pace, the nation’s customs bureau said June 10, signs the economy is withstanding the sovereign-debt crisis in Europe and remains at risk of overheating. Exports climbed 48.5 percent from a year earlier, the biggest gain in six years.
Japan said its economy expanded more than initially estimated in the first quarter, driven by exports and an upward revision to consumer spending.
“The improved data allays some of the concerns over global growth prospects,” Aroop Chatterjee, a currency strategist at Barclays Plc in New York, said on June 10.
The greenback appreciated after an unexpected drop in US retail sales spurred demand for Treasuries and other dollar-denominated assets. Retail sales decreased 1.2 percent in May, the biggest decline since September 2009, following a 0.6-percent April gain that was larger than previously estimated, commerce department figures showed.
“The consumer is much weaker than we thought,” said Sebastien Galy, a currency strategist at BNP Paribas in New York.
The dollar has strengthened 9 percent this year, the third- best performance among its developed-world counterparts after the Canadian dollar and the yen, according to Bloomberg Currency Correlation-Weighted Indices. The euro has dropped 9.6 percent this year for the worst performance.
The euro’s decline may slow as investors turn their attention away from the European debt crisis to the possibility the global economic recovery will stall, according to HSBC Holdings Plc.
“While there are concerns over fiscal policy in the euro zone, the foreign-exchange market may now be looking at the risk to the global recovery,” HSBC analysts led by London-based David Bloom, global head of currency strategy, wrote in a research note. “If attention turns more toward the risk of a renewed slowdown, then the market will turn its attention to currencies with external positions, and the downward pressure on the euro will slow.”
