BLBG:Yen Rises To Six-Week High Versus Euro On Growth Concern
The yen rose to the strongest level in almost six weeks against the euro as signs global growth is slowing underpinned demand for the relative safety of the Japanese currency.
The dollar appreciated versus all but one of its 16 major counterparts after South Korea unexpectedly cut interest rates and European and Asian stocks declined. The euro fell below $1.22 for the first time since July 2010. Australia’s dollar dropped the most in three weeks after a government report showed employers cut payrolls in June. The yen briefly erased gains after the Bank of Japan (8301) bolstered its asset-purchase fund.
“We are seeing very significant negative signals being generated by leading indicators, suggesting that the global slowdown is continuing to gain momentum,” said Ian Stannard, chief European currency strategist at Morgan Stanley in London. “The yen and the dollar are both going to remain supported.”
The yen climbed 1.1 percent to 96.58 per euro at 7:02 a.m. New York time after appreciating to 96.54, the strongest level since June 1. Japan’s currency advanced 0.6 percent to 79.30 per dollar. The euro weakened 0.4 percent to $1.2190 after sliding to $1.2185.
The Bank of Korea unexpectedly cut borrowing costs for the first time in more than three years, lowering the benchmark seven-day repurchase rate by a quarter percentage point to 3 percent. The Stoxx Europe 600 Index of shares fell 0.7 and the MSCI Asia Pacific Index declined 1.6 percent.
China Growth
Figures tomorrow will show China’s gross domestic product growth slowed to an annual 7.7 percent last quarter, from 8.1 percent in the previous three months, a separate Bloomberg survey showed.
“We do have quite a lot of key event risks coming up including Chinese GDP tomorrow, said Khoon Goh, a senior foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd. (ANZ) ‘‘If we get a weaker run of data, then concerns over global growth will again come to the fore, and that is typically positive for the yen.’’
Japan’s currency gained 6.9 percent in the past three months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 4.6 percent, and the euro dropped 3.9 percent.
The yen briefly erased its daily advance versus the dollar and euro after the BOJ boosted its purchase program and said it will continue powerful monetary easing.
BOJ Purchases
The BOJ expanded its asset-purchase fund by 5 trillion yen to 45 trillion yen and cut the size of a credit loan facility by the same amount to 25 trillion yen. The central bank held its benchmark rates at between zero to 0.1 percent and left the maturity of government debt it buys unchanged at three years.
‘‘The initial jump we saw in dollar-yen after the BOJ announcement was a mistake,’’ said Masafumi Yamamoto, chief currency strategist in Tokyo at Barclays Plc in Tokyo. ‘‘Today’s decision doesn’t have much material impact on currencies because the BOJ didn’t extend the maturity of bond it purchases to four years or longer, or change the total of its stimulus program.”
Allianz Global Investors, which oversees the equivalent of $305 billion, is selling the euro against the dollar on concern the region’s leaders aren’t proactive enough to stem the market turmoil.
“The euro should weaken,” Andreas Utermann, Frankfurt- based global chief investment officer at Allianz, said in an interview on Bloomberg Television’s “On the Move” with Francine Lacqua. “We fear the policy makers will continue to be driven by the markets.”
Euro Forecast
The euro may extend declines against the greenback, Bank of Tokyo-Mitsubishi UFJ Ltd. said, citing Fibonacci analysis.
“The 50 percent retracement, at around $1.21, to the euro’s historical low from the high is within reach, given the drop we saw in the currency” yesterday, said Kikuko Takeda, a senior currency economist in London. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching new high or low.
The retracement level is at $1.2134, based on the low of 82.30 U.S. cents in October 2000 and the high of $1.6038 in July 2008, according to data compiled by Bloomberg. The level was last seen in June 2010.
Australia’s dollar dropped for the fourth time in five days after the statistics bureau said in Sydney said the number of people employed in the country fell by 27,000, almost erasing a revised 27,800 job gain in May. The jobless rate increased for a second month, to 5.2 percent from 5.1 percent.
“The jobs numbers were much weaker than expected,” said Sue Trinh, a senior currency strategist in Hong Kong at Royal Bank of Canada. “That’s bearish for the Aussie dollar.”
Australia’s currency weakened 1.2 percent to $1.0127 after posting the biggest intraday decline since June 21. The Aussie slid 1.8 percent to 80.30 yen.
To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
