BLBG:Yen Rises as U.S. Impasse Stokes Safety Bid; Euro Gains
The yen advanced against its 16 major counterparts as U.S. lawmakers struggled to reach an accord on raising the nation’s debt limit and restoring government operations, spurring demand for safer assets.
The Japanese currency gained for the first time in five days against its U.S. peer after the Senate ended almost four hours of debate in Washington without a deal. The U.S.’s borrowing authority is set to lapse Oct. 17. The euro gained versus the dollar before a report forecast to show industrial production in the region rebounded in August. Singapore’s dollar held a two-week gain after the central bank decided to retain the currency’s “modest and gradual” appreciation.
“U.S. politicians are negotiating and that leaves us with a risk-averse start to the session, which will support the yen,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “It continues to weigh on the dollar. If we see some degree of improvement then that will provide some support for the dollar.”
The yen rose 0.3 percent to 98.28 per dollar at 8:41 a.m. London time. Japan’s currency advanced 0.2 percent to 133.29 per euro. The dollar weakened 0.1 percent to $1.3562 per euro after touching an eight-month low of $1.3646 on Oct. 3.
The deadlock over increasing the debt ceiling from $16.7 trillion is threatening the U.S. and world economies, International Monetary Fund Managing Director Christine Lagarde said yesterday. U.S. stock trading will take place on the federal Columbus Day holiday today, while bond markets will be closed. Japan’s markets are also closed today for a holiday.
Productive Conversation
Senate Majority Leader Harry Reid said yesterday that he had a “productive conversation” with Minority Leader Mitch McConnell without reaching a conclusion on a plan to send to the Democratic-controlled chamber for a vote.
“Given the fiscal shenanigans, we could go through several months of dull data, especially if we get just a short-term fix,” said Greg Gibbs, a Singapore-based senior currency strategist at Royal Bank of Scotland Group Plc. “The euro could maybe get up toward $1.40 on the basis that the market will be looking for an alternative to the dollar and a recovery is occurring modestly in Europe.”
Factory production in the 17-nation euro area rose 0.8 percent in August, after a 1.5 percent decline the previous month, the European Union’s statistics office will say today, according to the median prediction of 38 economists in a Bloomberg News survey.
The euro-region economy emerged from its longest recession on record this year, growing 0.3 percent in the second quarter.
European Indicators
“European activity indicators continue to tell the story of improving economic growth,” said Mike Jones, a currency strategist in Wellington at Bank of New Zealand Ltd. “That’s been a story that’s certainly helping the euro and I think it will probably continue.”
The dollar has declined 1.1 percent over the past month, according to Bloomberg Correlation Weighted Indexes which track 10 developed-country currencies. The euro gained 1.1 percent and the yen is little changed.
Singapore’s central bank said it will retain the existing pace of currency appreciation in a bid to combat inflation, even as the economy shrank in the last quarter. There’ll be no change to the slope, width and center of the currency trading band the Monetary Authority of Singapore uses as its main policy tool, it said. Gross domestic product shrank an annualized 1 percent in the third quarter from the previous three months, a report showed today.
The Singapore dollar will drop after a “short-term bounce,” said Nick Verdi, a Barclays Plc currency strategist based in the city state. “Singapore’s growth-inflation dynamics remain more challenging than its peers.”
The nation’s dollar was little changed at S$1.2464 versus its U.S. counterpart. It has dropped 2 percent this year.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
