BS: Yen Drops as Gain in Stocks, Recovery Signs Buoy Risk Demand
Oct. 13 (Bloomberg) -- The yen fell against most of its major counterparts as rising stocks and evidence 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 said he may examine enhancing a 5 trillion yen ($61 billion) fund to buy government debt. The euro pared gains after rising to within a cent of an eight-month high versus the dollar following an increase in Europe’s industrial output.
“There were hints of stronger data in different parts of the world, and risk-sensitive currencies are outperforming,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “Any potential further intervention from the Japanese authorities and/or policy easing will essentially serve to prompt buyers into this temporary yen weakness.”
The yen slid for the first time in five days versus the euro, declining 0.2 percent to 114.03 at 9:31 a.m. in New York, from 113.79 yesterday. Japan’s currency depreciated 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 traded at $1.3934, compared with $1.392, after rising 0.6 percent. It reached $1.4029 on Oct. 7, the highest level since Jan. 28.
The MSCI World Index of shares advanced 0.7 percent, while the Standard & Poor’s 500 Index added 0.5 percent.
Asian currencies strengthened on speculation Fed debt buying, also known as quantitative easing, will pump more cash into the U.S. economy, boosting the inflow of funds into emerging-market assets.
Boost in Won
South Korea’s won was the best performer versus the dollar among the greenback’s most-traded counterparts, appreciating 1 percent to 1,120.70. It touched 1,110.75 on Oct. 11, the strongest level since May 3.
Thailand’s baht gained 0.2 percent to 29.92 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.
Australia’s dollar climbed 0.2 percent to 98.78 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 Russian ruble fell to its weakest level against the euro in eight months as three of the biggest trading firms said the central bank is weakening exchange-rate limits. The ruble slipped to 42.20 per euro, the weakest since Feb. 2.
Dollar Index
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 gained as much as 0.2 percent to a record 95.45 centimes per dollar 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.
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 the prior month. That’s above the 0.8 percent gain forecast by economists in a Bloomberg News survey.
The 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.”
Yuan Forwards
Yuan forwards were near a two-year high today on speculation China will allow greater gains and on signs the Fed may inject more U.S. stimulus.
Twelve-month non-deliverable forwards climbed 0.1 percent to 6.4529 per dollar, reflecting bets the currency will strengthen 3.3 percent from the spot rate over the next year, according to data compiled by Bloomberg.
China’s foreign-exchange reserves, the world’s largest, surged by a record to $2.65 trillion at the end of September, adding fuel to complaints that the nation’s curbs on gains in the yuan are undermining the global recovery.
U.S. Treasury Secretary Timothy F. Geithner said in an interview with “Charlie Rose” airing on PBS yesterday and scheduled to air on Bloomberg Television today that China’s policy of buying dollars to hold down the yuan is distorting the global currency system by forcing other emerging-market nations to intervene.
The yen remained stronger than 82.88 per dollar, where it traded on Sept. 15, when Japan acknowledged selling the currency 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.”
--With assistance from Candice Zachariahs in Sydney. Editors: Dennis Fitzgerald, Greg Storey
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
