BS: Yen Falls as Gain in Stocks, Recovery Signs Buoy Risk Demand
Oct. 13 (Bloomberg) -- The yen fell against all of its major counterparts as rising stocks and signs the global economic recovery is gathering momentum spurred demand for higher-yielding assets.
Japan’s currency also dropped as Bank of Japan Governor Masaaki Shirakawa indicated he may examine enhancing a 5 trillion yen ($61 billion) fund to buy government debt. The euro traded within a cent of an eight-month high versus the dollar as a gain in European output stoked speculation the European Central Bank will end debt purchases before the Fed.
“The yen weakened as demand for riskier assets improved,” said Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London. “Shirakawa’s comments about possibly increasing the BOJ’s range of asset purchases also weighed on the currency. It has to be seen to be believed whether or not Japanese monetary policy is going to have any lasting impact on the yen.”
Japan’s currency weakened 0.5 percent to 114.30 per euro at 7:30 a.m. in New York, from 113.79 yesterday. The yen slid 0.1 percent to 81.81 per dollar, from 81.72. It touched 81.39 on Oct. 11, the strongest level since April 1995. The euro gained 0.3 percent to $1.3971, from $1.3924. It reached $1.4029 on Oct. 7, the highest level since Jan. 28.
The MSCI World Index of shares advanced 0.7 percent, while and the Stoxx Europe 600 Index climbed 1 percent.
Aussie Gain
Australia’s dollar appreciated 0.3 percent to 98.91 U.S. cents as a gauge of consumer confidence rebounded in October. The Aussie touched 99.18 U.S. cents on Oct. 7, the highest level since it began trading freely in 1983.
The sentiment index for Australia rose 3.3 percent to 117 this month, after a 5 percent drop last month, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers conducted Oct. 4-10.
The Russian ruble fell to its weakest level against the euro in eight months as three of the biggest domestic trading firms said the central bank is weakening exchange-rate limits. The ruble slipped to 42.20 per euro, the weakest since Feb. 2.
Asian currencies strengthened on speculation Fed quantitative easing will pump more cash into the U.S. economy, boosting the inflow of funds into emerging-market assets.
South Korea’s won was the best performer versus the dollar among the most-traded currencies, advancing 1 percent to 1,120.70. It touched 1,110.75 on Oct. 11, the strongest level since May 3.
Thailand’s Baht
Thailand’s baht gained 0.1 percent to 29.94 per dollar after advancing to the 13-year high of 29.80 even as the government said yesterday it will remove a 15 percent tax exemption on overseas investors’ income from domestic bonds.
The Dollar Index, used by IntercontinentalExchange Inc. to track the greenback against currencies including the euro, yen and Swiss franc, slid as much as 0.5 percent to 76.972. It touched 76.906 on Oct. 7, the lowest level since Jan. 15. The franc strengthened to 95.45 centimes per dollar, the strongest ever, before trading at 95.51 centimes.
The gauge of the dollar has fallen 4.1 percent since Sept. 21, when the Fed said in a statement following its policy meeting that it’s prepared “to provide additional accommodation if needed” to support the recovery.
That phrase was meant to be in accord “with the members’ sense that such accommodation may be appropriate before long,” according to minutes released yesterday of the Federal Open Market Committee’s meeting.
‘Hurting the Dollar’
“The FOMC minutes kept expectations alive that another round of quantitative easing might begin as early as November,” said Gareth Berry, a currency strategist at UBS AG in Singapore. “These minutes are hurting the dollar.”
The yen remained stronger than 82.88 per dollar, where it traded on Sept. 15, when Japan acknowledged selling the yen to help its export-dependent economy.
The Japanese currency’s advances hurt companies’ profits and confidence, the BOJ’s Shirakawa told parliament today, adding that the bank will keep monitoring the currency market “with great interest.”
Large manufacturers expected the yen to average 89.44 per dollar in the six months to March 2011, according to the Bank of Japan’s Tankan survey released on Sept. 29.
The euro approached its strongest level against the dollar since January as the European Union’s statistics office said industrial production rose 1 percent in August after a revised 0.1 percent increase in July. That’s above the 0.8 percent gain forecast by economists in a Bloomberg News survey.
European Central Bank Governing Council member Axel Weber said yesterday that the risk of recession in Europe is “negligible” and the central bank should stop its bond- purchase program. Weber, who also heads Germany’s Bundesbank, said “these securities purchases should now be phased out permanently.”
--Editors: Dennis Fitzgerald, Dave Liedtka
To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
