The yen and dollar strengthened against most of their major counterparts before data that may indicate a slowdown in the global economy, boosting demand for haven currencies.
The yen headed for its biggest monthly gain in more than a year versus the euro before reports today forecast to show U.S. consumer spending slowed in August and retail sales in Germany decreased. New Zealand’s dollar slid after Standard & Poor’s joined Fitch Ratings in cutting the country’s credit ratings. Demand for the yen also rose on prospects Japanese exporters are repatriating overseas income at the end of quarter.
“There would be demand for safe haven currencies,” like the dollar and yen, said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s biggest lender. Weak economic data “would support the U.S. dollar on a safe-haven bid, particularly with the background of flip-flopping concerns about the situation in Europe.”
The dollar climbed to $1.3525 per euro at 1:05 p.m. in Tokyo from $1.3597 in New York yesterday, having risen 6.2 percent in September. The greenback weakened to 76.59 yen from 76.83 yen. The Japanese currency rose to 103.61 per euro from 104.48, set for a 6.3 percent advance this month, the biggest gain since May 2010.
The New Zealand dollar fell to 76.50 U.S. cents from 77.10.
Slowdown Signs
Personal spending in the U.S. rose 0.2 percent in August after a 0.8 percent increase the previous month, according to the median estimate of economists surveyed by Bloomberg News before the Commerce Department releases the figures today.
Retail sales in Germany, Europe’s largest economy, slid 0.5 percent last month after advancing a revised 0.3 percent in July, another survey showed ahead of today’s data.
Elsewhere, a gauge of Chinese manufacturing shrank for a third month, the longest contraction since 2009. The reading of 49.9 for the September purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics today, was unchanged from August. A number below 50 indicates a contraction.
Signs that the euro-zone debt crisis is hurting the region’s economy have prompted speculation the European Central Bank will lower borrowing costs next week.
Eight of 22 economists surveyed by Bloomberg News said the central bank will cut its benchmark interest rate by at least a quarter-percentage point from the current rate of 1.5 percent at its Oct. 6 policy meeting. The others expect no change.
ECB Rates
Swaps traders are betting the central bank will lower the rate by 35 basis points over the next 12 months, according to a Credit Suisse Group AG index. That compares with a 25 basis- point increase projected at the beginning of August.
“The sovereign debt issues in the region and the fact the market has turned to be pricing in rate cuts by the ECB can explain the recent downward trend in the euro,” Kikuko Takeda, a London-based senior currency economist at Bank of Tokyo Mitsubishi UFJ, a unit of Japan’s biggest publicly traded lender, said yesterday.
New Zealand lost its AAA grades on local-currency debt at Fitch Ratings and Standard & Poor’s, which both cited concerns about the nation’s fiscal burden. The outlook is stable after the long-term local-currency rating was reduced to AA+ and the foreign-currency rating was cut to AA from AA+, S&P said in a statement, matching actions announced yesterday by Fitch.
Yen Repatriation
The yen gained against all of its major peers amid speculation Japanese exporters are repatriating overseas earnings before the first half of the fiscal year ends today.
“Some buying of the yen is expected from Japanese exporters,” said Osao Iizuka , head of currency trading in Tokyo at Sumitomo Trust & Banking Co., a unit of Japan’s third- largest banking group. “There’s also a rumor in the market that Japanese authorities may intervene at the end of quarter so that the exporters can sell foreign currencies on a rally.”
Japanese Finance Minister Jun Azumi said he’s asked for the issuance limit of bills to finance foreign-exchange intervention to be raised by 15 trillion yen ($196 billion).
He also told reporters in Tokyo today that the ministry’s monitoring of financial institutions’ foreign-exchange market positions will be extended to the end of December.
The yen has gained 12.5 percent in the past three months, the best performer among the 10 currencies tracked by Bloomberg Correlation-Weighted Indexes.
Losses in the euro were limited after German lawmakers yesterday backed an enhanced euro-area rescue fund. Members of the Bundestag, the German parliament’s lower house, voted overwhelmingly in favor of legislation aimed at expanding the powers of the 440 billion-euro ($595 billion) European Financial Stability Facility. The legislation is set to be debated and put to a non-binding vote in the upper house, or Bundesrat, today. All 17 euro members must approve the changes to the EFSF before they go into effect.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
