The Japanese yen rose against the dollar and the euro as a decline in stocks and signs that economic recovery is slowing boosted demand for currencies perceived as a haven.
The yen advanced against all 16 major currencies tracked by Bloomberg as economic data including last week’s U.S. job report pointed to growth stalling. The Dollar Index fell to a one-month low on speculation that Federal Reserve may extend accommodative monetary policy to support growth. The euro earlier reached a one-month high against the dollar on bets European Union officials will reiterate their intent to craft a new aid package for Greece.
“There is an element of flight from risk,” said Michael Derks, chief strategist at FXPro Financial Services Ltd. “The dollar’s weakness will continue as investors see the risk of it being further debased. The yen is doing well against this backdrop partly because Japan, unlike the U.S., still runs a substantially current surplus.”
The yen strengthened 0.2 percent to 80.15 per dollar as of 10:55 a.m. in London. It rose to 80.05 last week, the most in a month. The Japanese currency appreciated 0.3 percent to 117.13 yen per euro. The euro traded little changed against the dollar at $1.4619 after earlier rising to $1.4658, the strongest since May 5. The Canadian dollar weakened to 98.06 cents per U.S. dollar from 97.78 cents last week.
‘Dollar Weakening’
“There is a perception in the market that the global economic recovery might be stalling and investors are assessing what that means to monetary policy among major economies,” said Jeremy Stretch, London-based head of currency strategy at Canadian Imperial Bank of Commerce. “The yen is likely to benefit in this kind of environment.”
The yen’s gain helped to pare its decline this year. The currency is down 5.2 percent against nine other currencies of developed nations as measured by Bloomberg Correlation-Weighted Indexes. It has still beaten the dollar, which dropped 6.4 percent during the same period, making it the worst performer.
“The general trend of dollar weakening will continue until the Fed signals it’s going to raise rates,” said Greg Anderson, a senior currency strategist at Citigroup Inc. in New York.
The dollar’s best monthly performance since November may prove fleeting as a slowing American economy and falling short- term interest rates encourage investors to use the currency to fund investments in higher-yielding assets.
U.S. Payrolls
The U.S. currency’s value will be unchanged from current levels by year-end, down from last month’s predicted 2 percent appreciation, according to analyst forecasts compiled by Bloomberg. Bets remain tilted against the greenback even after last month’s 2.3 percent gain in IntercontinentalExchange Inc.’s Dollar Index, according to Commodity Futures Trading Commission data.
Payrolls rose 54,000 in May, Labor Department data showed on June 3. That was below the median forecast for an 165,000 increase in a Bloomberg News survey. The unemployment rate unexpectedly climbed to 9.1 percent last month from 9 percent the previous month.
The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, fell to 73.640, its lowest level since May 5, before trading at 73.770 from 73.783 last week.
EU, IMF, Greece
EU and International Monetary Fund officials agreed to pay the next installment to Greece under last year’s bailout, paving the way for an upgraded aid package that includes a “voluntary” role for investors. Greece said a review of the country’s economic progress concluded “positively.”
“I expect the euro group to agree to additional financing to be provided to Greece under strict conditionality,” said Jean-Claude Juncker, who leads the group of euro-area finance ministers, after meeting with Greek Prime Minister George Papandreou in Luxembourg on June 3. Juncker and Olli Rehn, EU Economic and Monetary Commissioner, are scheduled to speak in Strasbourg, France today.
Producer prices in the euro region rose 6.7 percent in April from a year earlier, after a revised 6.8 percent increase in March, the European Union’s statistics office in Luxembourg said today. The March producer-price inflation rate was the highest since September 2008.
The ECB is expected to leave its 1.25 percent benchmark interest rate unchanged at its June 9 meeting, according to all 50 economists surveyed by Bloomberg.
To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net; Kristine Aquino in Singapore at Kaquino1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
