BLBG:Yen Falls 3rd Day Versus Dollar on Signs U.S. Economy Improving
The yen weakened for a third day, approaching 100 per dollar, as optimism that the U.S. economic recovery is gathering pace reduced demand for the Japanese currency as a haven.
The yen declined against 14 of its 16 major peers as a report on May 3 showed the U.S. jobless rate unexpectedly fell to a four-year low. Australia’s currency weakened after a report today showed retail sales shrank. The Malaysian ringgit rose to the highest in 1 1/2 years against the dollar after Prime Minister Najib Razak’s coalition was re-elected. Sweden’s krona slid as a report showed the slump in the nation’s services eased less than economists predicted.
“The dollar-yen move was an obvious one on the back of the payrolls,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “There’s an element of reducing some of the pessimism that was starting to build up. There was a lot of uncertainty about the durability of the U.S. recovery process.”
The yen slid 0.4 percent to 99.36 per dollar as of 9:58 a.m. in London, after touching 99.45, the weakest level since dropping to a four-year low of 99.95 on April 11. It depreciated 0.3 percent to 130.24 per euro. The 17-nation currency was little changed at $1.3107.
Markets in Japan and the U.K. are closed today for a holiday.
U.S. Data
The yen depreciated beyond 99 per dollar on May 3 for the first time in a week after a U.S. Labor Department report showed employment picked up more than forecast last month and the jobless rate declined to 7.5 percent. Payrolls expanded by 165,000 workers last month following a revised 138,000 increase in March that was larger than first estimated.
“Stronger U.S. data provided a fresh reason to sell the yen,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney. “We needed something positive from the U.S. side to get back above 99, so now of course we start to think about 100 again.”
Initial jobless claims rose to 335,000 in the seven days ended May 4 from a more than five-year low of 324,000 the week earlier, according to the median estimate of economists surveyed by Bloomberg News before the May 9 report.
The world’s biggest currency dealers predict the dollar will strengthen as U.S. growth accelerates in the second half of the year. Deutsche Bank AG, Citigroup Inc., UBS AG and Barclays Plc forecast an advance of as much as 9 percent versus the euro by Dec. 31.
Currency Indexes
The dollar has gained 1.3 percent over the past six months, according to Bloomberg Correlation-Weighted Indexes that track 10 developed market currencies. The euro has risen 3.9 percent.
The yen has slumped 20 percent, the worst performer on the indexes, in anticipation of expanded stimulus from the Bank of Japan that culminated in the April 4 decision to double monthly bond purchases in pursuit of a 2 percent annual inflation target.
“Short-term speculative sentiment remains wholly yen negative and technically the market looks poised to try again at the 100-yen level,” Marc Chandler, the global head of currency strategy at Brown Brothers Harriman & Co. in New York, wrote in a research note sent yesterday.
In Australia, retail sales unexpectedly fell 0.4 percent in March after gaining 1.3 percent the previous month, a government report showed today. Economists surveyed by Bloomberg predicted a gain of 0.1 percent.
There’s a 51 percent chance that the Reserve Bank of Australia will lower its benchmark 3 percent rate when it meets tomorrow, Bloomberg calculations based on overnight-index swap rates indicate.
Rate Expectations
“We continue to expect a cut in the next few months with May a good chance,” National Australia Bank Ltd. analysts, led by Global Head of Research Peter Jolly, wrote in an e-mailed note to clients after the retail sales data.
The so-called Aussie slid 0.7 percent to $1.0245. It lost 0.5 percent to NZ$1.2034 after touching NZ$1.2016, the lowest since Oct. 6, 2009.
The Malaysian ringgit gained as much as 2.3 percent to 2.9625 per dollar, the strongest since September 2011. Najib’s coalition extended its 55-year rule, giving him a mandate to continue his economic reforms and deliver $444 billion of infrastructure and other investments by 2020.
The Swedish krona depreciated 0.2 percent to 6.5212 per dollar and was 0.2 percent weaker at 8.5469 versus the euro.
An index based on responses from purchasing managers rose to a seasonally adjusted 48.6 in April from 47.3 the previous month, Stockholm-based Swedbank (SWEDA), which compiles the index, said today. A reading below 50 signals a contraction. The median estimate of five economists surveyed by Bloomberg was for the reading to rise to 49.
To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net;
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
