BLBG: Yen Is Near Week Low as Improving Outlook Curbs Safety Demand
By Ron Harui
June 16 (Bloomberg) -- The yen traded near the lowest in more than a week against the euro as signs the global economy is gathering momentum pared demand for Japan’s currency as a refuge.
The yen was close to a four-week low versus Australia’s dollar before a report today forecast to show U.S. industrial production expanded by the most in four months and after Japanese demand for services rebounded in April. The Australian and New Zealand dollars traded near the strongest levels since mid-May after a global rally in stocks and falling volatility boosted demand for riskier investments.
“The U.S. economy is outperforming,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest interdealer broker. “You’ve got to be short yen,” he said, referring to bets the currency will weaken.
The yen traded at 112.77 per euro as of 6:40 a.m. in London from 112.78 in New York yesterday, when it fell to 113.05, the weakest since June 4. It was at 91.48 per dollar from 91.46. Japan’s currency was at 79.07 per Australian dollar from 79.16 yesterday. It reached 79.61 on June 14, the weakest since May 19. The greenback fetched $1.2328 per euro from $1.2332.
The Australian currency was at 86.44 U.S. cents from 86.56 cents yesterday. It rose as high as 86.67 cents on June 14, the strongest since May 18. New Zealand’s dollar traded at 69.48 U.S. cents from 69.90 cents and touched a near one-month high of 70.21 cents on June 14.
Output at U.S. factories, mines and utilities increased 0.9 percent in May, the most since January, after a 0.8 percent gain in April, a Bloomberg News survey of economists showed before the Federal Reserve report today. The Fed Bank of New York said yesterday its manufacturing gauge advanced for an 11th month.
Japan Services
Japan’s tertiary index, which captures 63 percent of the economy, added 2.1 percent in April from March, the Trade Ministry said today in Tokyo, snapping a two-month decline.
The MSCI Asia Pacific Index of regional shares climbed 1.1 percent today. The Standard & Poor’s 500 Index yesterday gained 2.4 percent, rising above its 200-day moving average, which is considered significant by investors who base trading decisions on chart patterns.
“The S&P 500 closed above its 200-day moving average and volatility is settling down, which is supportive for risk continuing higher,” said Imre Speizer, a market strategist in Wellington with Westpac Banking Corp.
The Chicago Board Options Exchange Volatility Index, Wall Street’s so-called fear gauge, dropped to as low as 25.68 yesterday, the least since May 13.
European Auctions
Benchmark interest rates are 4.5 percent in Australia and 2.75 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
Losses in the euro were limited as results from government bond sales yesterday showed indebted nations can still tap markets for funding.
Spain sold 4.18 billion euros ($5.15 billion) of 12-month bills, with investors bidding for 1.49 times the amount. It also sold 987.78 million euros of 18-month notes, which had a so- called bid-to-cover ratio of 3.51. Ireland sold 1.5 billion euros of six- and eight-year debt. Investors bid for 3.1 times the 2016 securities offered and 2.9 times the 2018 debt.
Ringgit, Won
“Concerns about Europe’s debt problems eased following successful government debt auctions by Spain and Ireland overnight,” John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., wrote in a research note today.
Malaysia’s ringgit traded near a two-week high on speculation data from Asia will show the region’s economies are improving.
A report tomorrow will show Singapore’s non-oil domestic exports gained for a seventh month in May, according to a Bloomberg survey. Taiwan’s export orders climbed 38 percent last month after rising 35 percent in April, economists predicted ahead of data due June 21.
“There is optimism about economic growth, and that helps to boost the currencies of export-oriented economies like Malaysia,” said Hideki Hayashi, a global economist at Mizuho Securities Co. in Tokyo. “With rising stocks, investors’ risk appetite is growing, which supports regional currencies.”
The ringgit was at 3.2580 per dollar from 3.2600 yesterday, when it reached 3.2470, the strongest level since May 31, according to data compiled by Bloomberg. South Korea’s won gained 1.4 percent to 1,211.20 to the dollar.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net
