BLBG: Yen Falls Versus Euro on Rebound in Asian Stocks, Intervention Speculation
The yen retreated from a six-week high against the euro as a rebound in Asian stocks revived demand for higher-yielding assets.
The yen also weakened after Dow Jones said Japanese Prime Minister Naoto Kan and central bank Governor Masaaki Shirakawa may meet next Monday to discuss the currency’s recent gains. South Korea’s won strengthened the most in two weeks on speculation the central bank will allow the currency to rise to contain inflation.
“It is apparent that the Japanese authorities will step up levels of warning as the yen approaches the 85 level, making it harder for investors to test further upside,” said Hiroshi Maeba, deputy general manager of foreign-exchange trading in Tokyo at Nomura Securities Co., Japan’s biggest securities broker. “We also need to be aware about comments from policy makers on possible actions.”
The yen dropped to 109.67 per euro as of 7:08 a.m. in London from 109.44 yesterday in New York, after earlier climbing to 109.07, the strongest since July 1. Japan’s currency traded at 85.33 per dollar from 85.32. The greenback was at $1.2853 per euro from $1.2827.
The MSCI Asia Pacific Index of shares rallied from an early loss to gain for a third day, rising 0.3 percent. Futures on the Standard & Poor’s 500 Index also advanced 0.3 percent.
‘Knee-Jerk Selling’
“A rebound by Asian stocks and the stabilizing of U.S. stock futures triggered knee-jerk selling of the yen, which had been bought as a safe haven,” said Takashi Kudo, general manager of market information at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. in Tokyo.
The yen climbed to 84.73 per dollar on Aug. 11, the strongest since July 1995, fueling speculation Japan’s government will take action to curb its gains to aid exporters.
The government will start debate on Aug. 20 on steps to stimulate the economy, Reuters reported, citing a Jiji Press report of comments by economics minister, Satoshi Arai.
Lawmakers from Japan’s ruling party last week urged Kan to consider intervening in the currency market for the first time since 2004. They also called on the Bank of Japan to “engage in large-scale monetary easing.”
More than a third of Japan’s margin traders predict policy makers will intervene to weaken the yen if it strengthens past this week’s 15-year high, a survey by Gaitame.com Research Institute Ltd. showed.
Last Intervention
Japan hasn’t intervened in the currency market since March 2004, when the yen at about 109 per dollar. The Bank of Japan sold 14.8 trillion yen ($173 billion) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003. The currency ended 2004 at 102.63 to the dollar.
Gains in the euro were limited before reports today that economists said will show German investor confidence fell, U.K. inflation slowed and Canadian factory sales declined.
The ZEW Center for European Economic Research’s index of German investor and analyst expectations fell for a fourth month in August, according to a Bloomberg survey of economists. U.K. consumer-price inflation slowed to 3.1 percent in July from 3.2 percent the prior month, and Canadian factory sales fell 0.5 percent in June, according to separate Bloomberg surveys.
“The euro zone will languish as austerity measures there pose downside risks to the region’s economy,” said Takeshi Makita, senior economist in Tokyo at Japan Research Institute Ltd., a unit of Sumitomo Mitsui Financial Group Inc. “The euro will struggle to extend gains.”
Treasury Yields
The dollar was near a 15-year low against the yen after 10- year Treasury yields slid yesterday to the lowest level since March 2009, damping the appeal of U.S. assets.
“The current consensus is that U.S. economic momentum is slowing faster than elsewhere,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “U.S. yields are also falling. Hence, investors are adding to dollar short positions.” A short position is a bet an asset will fall.
Futures traders increased bets to the most since December 2009 that the yen will gain against the dollar, data from the Commodity Futures Trading Commission showed last week. The difference in the number of wagers by large speculators on an advance in the yen compared with those on a drop -- so-called net longs -- rose to 52,478 on Aug. 10 from 47,998 a week earlier.
The won led gains in Asian currencies after central bank Governor Kim Choong Soo predicted today that consumer-price inflation will accelerate. The Bank of Korea aims to keep price increases within a range 2 percent to 4 percent through 2012, and the headline inflation rate in July was 2.6 percent.
“Bank of Korea was pretty hawkish in its comments,” said Robert Reilly, co-head of Asian fixed-income at Societe Generale in Hong Kong. “It is particularly concerned about accelerating inflation.”
The won advanced 1 percent to 1,176.20 per dollar, the biggest gain45DHSSTHYURE&peplid=16325181&interviewstatus=0&interviewreporterpepl=0&intervieweditorpepl=0">Yasuhiko Seki in Tokyo at +81-3-3201-7297 or yseki5@bloomberg.net; Ron Harui in Singapore at +65-6212-1161 or rharui@bloomberg.net.
