BS: Emerging Currencies Gain as Ukraine Tension Eases; Yen Declines
Emerging-market currencies rose the most in more than a week as a lack of signs of escalation in Ukraine drives investors’ demand for riskier assets.
The yen fell against most of its 31 major peers as President Barack Obama issued new sanctions on Russian individuals and companies. The won gained the most in more than two weeks on bets South Korean exporters are repatriating overseas earnings as the month-end approaches. The pound advanced to a four-year high as a wave of mergers and acquisitions boosted demand for the British currency.
“There was caution heading into the weekend about geopolitical developments, the lack of new significant developments is causing a reversal of the Friday effect,” Daniel Katzive, a director and head of FX strategy, North America, in New York at BNP Paribas SA, said in a phone interview. “You’re seeing that unwinding as we come out of the weekend.”
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A custom Bloomberg index with equal weightings of the dollar’s 20 major emerging-market peers rose 0.2 percent to 92.0463 as of 9:43 a.m. in New York, the biggest jump since April 17. It fell 0.1 percent on April 25.
The yen dropped for the first time in five days against the dollar, losing 0.2 percent to 102.31. It fell 0.4 percent to 141.85 per euro. The greenback slipped 0.2 percent to 1.3865 per euro.
‘Selling Dollars’
The won rose the most after Colombia’s peso among 24 emerging-market currencies tracked by Bloomberg, gaining 0.6 percent to 1,035.25 versus the dollar and touching the strongest level since April 17.
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“A lot of exporters were seen selling dollars, as it’s near the end of the month,” said Han Sung Min, a Seoul-based currency trader for Busan Bank. “We also have public holidays coming soon.”
Shipments (KOEXTOTY) from Asia’s fourth-biggest economy probably increased 5.5 percent in April from a year earlier, after rising 5.1 percent in March, according to a Bloomberg survey of economists before official data due May 1. Foreign investors bought $3.1 billion more of the nation’s equities than they sold this month, exchange data show. South Korea’s financial markets are closed on May 1, 5 and 6 for holidays.
Sterling strengthened the most in almost two weeks against the U.S. dollar before data tomorrow that economists said will show gross domestic product increased at the fastest pace since 2010 in the first quarter. Pfizer Inc. said it’s interested in a deal to buy AstraZeneca Plc (AZN), Britain’s second-biggest drugmaker.
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Long Sterling
“GDP figures are out tomorrow and with good news people have decided to test recent highs” for the pound, said Stuart Bennett, head of Group of 10 foreign-exchange strategy at Banco Santander SA in London. “The market is still quite long sterling, it’s a crowded trade at the moment and it’s going to take a lot to jump higher.” A long position is a bet that an asset price will rise.
The pound rose 0.2 percent to $1.6837 after adding as much as 0.3 percent, the biggest increase since April 16. It reached $1.6858, the highest level since November 2009.
The dollar slipped before the U.S. Federal Reserve meets this week and as investors await the latest reports on gross domestic product and employment.
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“We’ve got GDP, that’s an extra big data we’re looking at in terms of currencies,” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc., said in a phone interview. “We’re looking at the positive side.”
U.S. GDP
U.S. economic growth expanded at a 1.2 percent annualized pace in the first quarter, the slowest in a year, based on the median forecast in a Bloomberg survey of analysts before the Commerce Department report on April 30.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, dropped 0.1 percent to 1,009.86 after falling to 1,009.17, the lowest since April 17.
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Employers in the U.S. added 215,000 workers this month, the most since November, economists project a May 2 report from the Labor Department will say.
The Fed meets begins a two-day meeting tomorrow, when economists predict the central bank will cut its monthly asset-purchase stimulus program by another $10 billion to $45 billion. Policy makers will continue to taper at that pace until ending the program at its Oct. 28-29 meeting, according to a separate Bloomberg News survey.
Russia Sanctions
The ruble gained for the first time in seven days even as the Obama administration sanctioned seven influential Russian individuals and 17 companies, including some involved in the financial, energy and infrastructure sectors, the White House announced today.
“Russia has done nothing to meet its Geneva commitments and in fact has further escalated the crisis,” the White House said in an e-mailed statement.
The ruble added 0.7 percent to 41.9782 against the central bank’s target basket of dollars and euros. It lost 1.3 percent last week, when Standard & Poor’s lowered Russia’s credit rating to BBB- and the central bank raised the key interest rate 50 basis points to 7.5 percent to damp inflation.
JPMorgan Chase & Co.’s Group of Seven Volatility Index climbed for the first time in five days, advancing to 6.28 percent. The measure dropped to 6.18 percent on April 25, the lowest since July 2007.
To contact the reporters on this story: Andrea Wong in New York at awong268@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net Kenneth Pringle, Greg Storey
