BLBG: Yen Near Week High Versus Euro on Capital Curbs; Asian Currencies Weaken
The yen traded near a one-week high against the euro on speculation policy makers around the world will introduce more measures to restrict cross-border capital flows, boosting demand for Japan’s currency as a refuge.
The dollar rose against 12 of its 16 major counterparts after CME Group Inc.’s Comex unit raised margin requirements for trading silver futures and as World Bank President Robert Zoellick said emerging markets have “hot money issues.” Asian currencies weakened on concern authorities around the region will unveil measures to stem gains after Taiwan said it would restrict foreign investment.
“The CME’s increase in margin requirements for silver futures trading may be aimed at curbing speculative inflows,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “The bias appears to be for risk aversion, and for buying of the dollar and the yen.”
The yen traded at 112.54 per euro as of 1:52 p.m. in Tokyo from 112.51 in New York yesterday, when it climbed to 111.73, the strongest since Oct. 29. Japan’s currency was at 81.78 per dollar from 81.69. The dollar was at $1.3761 per euro from $1.3773, after rising to $1.3737, the highest since Oct. 27.
The minimum amount of cash that traders must deposit when borrowing from brokers to trade silver futures will rise to $6,500 per contract from $5,000 for exchange members, said Michael Shore, a spokesman for the exchange in Chicago.
China’s State Administration of Foreign Exchange said yesterday it would crack down on “hot money” inflows and it will introduce new rules on currency provisioning and tighten management of banks’ foreign-debt quotas.
Greater Protectionism
Currency tensions may increase protectionism, World Bank President Zoellick told reporters in Singapore before the Group of 20 leaders’ summit on Nov. 11-12 in Seoul, adding he doesn’t see a currency war developing.
Asian economies may need to turn to capital controls as quantitative easing by the U.S. threatens to spur asset bubbles, Sri Mulyani Indrawati, a World Bank managing director, said in an interview this week. Any curbs should be “targeted,” temporary and tailored to address specific problems, she said.
The euro touched a two-week low against the greenback on concern the European Central Bank will withdraw stimulus measures too early.
ECB President Jean-Claude Trichet, who speaks in Lyon, France, today, signaled on Nov. 4 the bank intends to outline possible steps to withdraw non-standard aid next month as some policy makers warn easy monetary policy risks spurring inflation.
‘Market May Suffer’
“As the ECB tightens liquidity to the financial sector, financial institutions that can’t access the market may suffer,” said Tsunemasa Tsukada, chief manager for currencies and financial products in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s largest financial group by market value. “People are switching their attention from U.S. quantitative easing to pains associated with ECB’s exit strategy,” weighing on the euro.
The ECB is committed to handing banks’ unlimited liquidity in its weekly, monthly and three-month refinancing operations until the end of the year.
Asian Currencies
The Thai baht and Singapore dollar led Asian currencies lower after Taiwan’s Financial Supervisory Commission said yesterday global funds can only invest up to 30 percent of their portfolio in bonds and money-market products.
“There is worry in emerging economies that quantitative easing will result in substantial hot-money inflows,” said Mitul Kotecha, head of global currency strategy at Credit Agricole CIB in Hong Kong. “They see this as difficult to control. With the run-up in asset prices, it is understandable where this concern is coming from.”
The Thai government last month removed a 15 percent tax exemption for non-resident investors on income from domestic bonds to stem inflows of funds. The central bank is studying additional measures aimed at reducing the baht’s volatility, Governor Prasarn Trairatvorakul said Oct. 21.
The baht fell 0.2 percent to 29.60 per dollar after climbing to 29.46, the strongest level since 1997. The Singapore dollar dropped 0.2 percent to S$1.2879.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
