BLBG:Yen, Dollar At 3-Week Lows Versus Euro As Shares Advance
The yen and dollar touched the lowest in more than three weeks against the euro as Asian shares extended a global rally on bets central banks are standing by to support growth, sapping demand for refuge assets.
The yen held a decline from the end of last week against major peers amid speculation the Bank of Japan will take action to weaken the currency at a two-day policy meeting starting Aug. 8. The Dollar Index slid to the lowest in a month before Federal Reserve Chairman Ben S. Bernanke speaks today. Demand for the euro was limited before data tomorrow that may show Germany’s factory orders and Italy’s industrial output fell.
“Risk markets are at very key levels of resistance at the moment and if they can be hurdled, then that would be evidence of the market’s good sentiment” for riskier assets, said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk-management company. “The yen and dollar would be on the back foot” in this scenario.
The yen touched 97.80 per euro, the weakest since July 12, before trading at 97.25 as of 6:35 a.m. in London, little changed from the close in New York on Aug. 3. It was unchanged at 78.47 per dollar. The U.S. currency declined to $1.2444 per euro, the lowest since July 5, before trading at $1.2393.
The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, dropped as much as 0.3 percent to 82.080, a level unseen since July 4.
The MSCI Asia Pacific Index (MXAP) of shares gained 1.8 percent, snapping a three-day drop. The Standard & Poor’s 500 Index advanced 1.9 percent on Aug. 3, while the Stoxx Europe 600 Index jumped 2.4 percent.
U.S. Jobs
The Labor Department said on Aug. 3 that U.S. payrolls increased by 163,000 in July, the most since February and exceeding the 100,000 gain estimated by economists surveyed by Bloomberg News. The unemployment rate rose to 8.3 percent from 8.2 percent in June.
The Fed said on Aug. 1 that it “will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.” The central bank bought $2.3 trillion of mortgage and Treasury debt from 2008 to 2011 in two rounds of so-called quantitative easing to stimulate the economy through lower borrowing costs.
“The increase in the unemployment rate kept alive hopes of more Fed quantitative easing,” Mitul Kotecha, head of global foreign-exchange strategy at Credit Agricole CIB in Hong Kong, wrote in a research note today.
Bernanke is due to speak on economic measurement at a conference in Cambridge, Massachusetts today.
BOJ Policy
Futures traders increased their bets that the yen will gain against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop was 32,254 on July 31, the most since February.
Japan’s central bank needs to monitor the impact of a stronger yen carefully, BOJ board member Yoshihisa Morimoto said on Aug. 2. The BOJ will ensure that it fulfills the asset- purchase program, Morimoto said, referring to the bank’s main policy tool.
“The market is expecting a little bit more from the Bank of Japan (8301),” said Rochford’s Averill. “The Bank of Japan is always going to do what it can to limit the appreciation of the yen.”
Standard Chartered Plc forecasts the BOJ is likely to expand the asset-purchase program to meet its 1 percent inflation goal. The nation’s consumer prices excluding fresh food fell 0.2 percent in June.
European Economy
The yen has appreciated 3.4 percent in the past three months versus nine developed-nation counterparts tracked by the Bloomberg Correlation-Weighted Indexes. The dollar has gained 1.4 percent, while the euro fell 4.5 percent.
Germany and Italy, the euro area’s biggest and third- largest economies, will release data tomorrow on factory orders and industrial production, respectively.
Orders fell 7 percent in June from a year earlier, the steepest drop since October 2009, according to economist estimates before the figure is released in Berlin. Italy’s national statistics office is likely to say industrial output fell for a 10th month in June with a 6.5 percent decline, a separate Bloomberg survey of economists shows.
Chart Analysis
“There are worries about worsening economic fundamentals as European countries move toward austerity,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The euro will grind lower in the medium to longer term.”
The euro’s five-day moving average has crossed above the 20-day moving average, said Marc Chandler, global head of currency strategy in New York at Brown Brothers Harriman & Co.
“A convincing move above the $1.2400 area should be respected in anticipation of another 2-3 cent advance in the coming weeks,” Chandler wrote in a research note. The euro’s technical outlook is “constructive.”
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
