BLBG:Yen Strengthens Amid Wrangle Over Greek Debt Accord; N.Z. Dollar Advances
The yen rose for a second day versus the euro as Greece and its private creditors struggle to reach agreement over a debt-swap accord, spurring demand for the safety of Japan’s currency.
The yen strengthened the most in almost four weeks versus the dollar on speculation the Federal Reserve is moving toward another round of bond purchases, further debasing the greenback. The euro fell against the yen before European leaders meet next week in an attempt to help resolve the two-year old debt crisis. New Zealand’s dollar rose after the nation unexpectedly posted its first trade surplus in five months.
“There’s a little bit of poorer sentiment going into this meeting, the politicians keep on telling us they are close to a deal but we all know it not going to be an end to Greece’s problems,” said Jane Foley, a senior currency strategist at Rabobank International in London. “U.S. interest rates have been a significant driver and, in another risk off mood, the yen will be well bid.”
The yen climbed 0.5 percent to 101.02 per euro at 9:48 a.m. in London after rising 0.4 percent yesterday. Japan’s currency advanced 0.7 percent to 76.94 per dollar, the biggest gain since Jan. 2. The greenback was little changed at $1.3128 per euro, having dropped 1.5 percent this week.
Discussions on a proposed Greek debt swap made “some progress” yesterday, according to the Institute of International Finance, which is representing creditors in talks with the government. IIF Managing Director Charles Dallara met with Greek Prime Minister Lucas Papademos in Athens yesterday, and work on a possible deal will resume today, the Washington- based group said in an e-mailed statement.
‘Open Question’
A solution in Greece is “still a very open question,” Deutsche Bank AG Chief Executive Officer Josef Ackermann, who chairs the IIF, said yesterday in a Bloomberg News interview at the World Economic Forum in Davos, Switzerland.
The cost of allowing Greece to fail would stretch beyond sovereign debt to investments in the country and the collapse of its economy, Ackermann said.
The dollar headed for its first two-week decline against the euro since October amid speculation the Fed is moving toward another round of bond purchases to cap borrowing costs and create jobs.
After a two-day policy meeting ended on Jan. 25, Fed Chairman Ben S. Bernanke said the central bank “recognizes the hardships imposed by high and persistent unemployment in an underperforming economy, and it is prepared to provide further monetary accommodation.”
The Fed has already bought $2.3 trillion of debt in two rounds of quantitative easing known as QE1 and QE2.
‘More Dovish’
“The more dovish Fed statement has served to reinforce the downward trend in the dollar” versus the yen, said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “Ongoing monetary easing outside of Japan remains supportive for then yen dampening the attractiveness of overseas assets for Japanese investors.”
The U.S. economy expanded at a 3 percent annual rate last quarter after advancing 1.8 percent in the previous three months, according to a Bloomberg News survey before today’s Commerce Department report.
The dollar has weakened 2.2 this month, according to Bloomberg correlation-Weight Indexes, which track 10 developed- nation currencies. The euro fell 0.8 percent, and the yen dropped 2.3 percent.
Kiwi Gains
New Zealand’s dollar headed for a sixth-weekly gain as Reserve Bank Governor Alan Bollardsaid the economy can weather a global slowdown.
Exports exceeded imports by NZ$338 million ($278 million) in December, the statistics bureau said. Economists surveyed by Bloomberg News predicted a NZ$50 million shortfall.
“We are seeing ongoing offshore demand for kiwi dollars,” said Tim Kelleher, head of institutional foreign-exchange sales in Auckland at ASB Institutional. New Zealand’s economy is “going OK, and certainly some of the individual sectors of the country are doing quite well,” he said.
The kiwi gained 0.3 percent to 82.42 U.S. cents, extending this week’s advance to 2.2 percent.
South Korea’s won fell from a two-month high against the dollar after central bank data showed manufacturers’ confidence held near a 30-month low.
The won slid 0.1 percent to 1,123.20 per dollar after rising to 1,120.43 yesterday, the highest since Nov. 14.
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net;
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
