BLBG: Yen Trades Near Five-Month Low on Reduced Demand for Refuge
The yen touched a five-month low against the euro and dollar on bets the worst of the global economic slump may soon be over, reducing demand for a refuge.
Japan’s currency fell against most of its major counterparts, sliding to the lowest level against New Zealand’s dollar since November as gold dropped. The South African rand was near the strongest level versus the dollar since October on speculation demand for higher-yielding assets increased.
“The market is thinking we’ve reached a flashing point and everything is fine,” said David Watt, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada’s biggest bank by assets. “I’m not convinced this rally is sustainable, but as long as the risk rally continues, the dollar and yen will suffer.”
The yen traded at 135.24 per euro at 10:50 a.m. in New York, compared with 135.26 on April 3. It touched 137.41, the weakest level since Oct. 20. Japan’s currency declined 0.5 percent to 100.85 per dollar, from 100.31 last week, and reached 101.44, the weakest level since Oct. 21. The euro lost 0.6 percent to $1.3411 from $1.3486.
New Zealand’s dollar rose as much as 2.7 percent to 60.35 yen, the highest level since Nov. 5, and Australia’s dollar gained 1.6 percent to 72.86, the strongest since Oct. 14.
“The yen is the primary victim of widespread optimism about the global economy,” said Tomohiro Nishida, a currency dealer at Chuo Mitsui Trust & Banking Co. in Tokyo.
Yen Versus Aussie
Japan’s currency lost more than 11 percent against the Australian and New Zealand dollars this year after gaining 54 percent and 65 percent, respectively, in 2008.
The MSCI World Index of shares climbed 0.5 percent today for a fifth day of gains. The contract on the Standard & Poor’s 500 Index decreased 1 percent.
Gold for immediate delivery slipped as much as 2.1 percent to $874.08 an ounce. Credit-default swap contracts on the Markit iTraxx Crossover Index of 45 companies with mostly high-risk, high-yield credit ratings decreased 15 basis points, or 0.15 percentage point, to 905, according to JPMorgan Chase & Co.
The VIX index, a measure of stock volatility known as Wall Street’s “fear gauge,” closed below 40 on April 3, the first time since January, indicating traders are becoming more confident about stock advances.
Risk Appetite
“The financial markets remain firmly in rising risk- appetite mode,” Derek Halpenny, European head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a report. “Equity markets continue to advance higher on optimism that the global economy is emerging from the worst point of the crisis.”
In emerging markets, South Korea’s won rose 2.4 percent to 1,309.25 per dollar after leaders of the Group of 20 nations agreed last week to give $850 billion to the International Monetary Fund and World Bank to support growth in developing countries. The won gained 18 percent in the past month, reducing its losses this year to 3.8 percent.
The rand gained as much as 1 percent to 8.9647 against the dollar, the strongest level since Oct. 14.
South Korea’s won, India’s rupee, Brazil’s real and the Mexican peso will appreciate against the dollar as investors seek higher-yielding assets on signs the global economy is stabilizing, according to Citigroup Inc., the world’s fourth- biggest currency trader.
Turkey’s Lira
Turkey’s lira, the Polish zloty, the rand and the Taiwan dollar will also rise against the U.S. currency and Swiss franc, Citigroup strategists Michael Hart in London and New York-based Todd Elmer wrote in a research note today.
Futures traders turned bullish on the euro against the dollar last week for the first time since July, figures from the Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so-called net longs -- was 2,265 on March 31, compared with net shorts of 5,458 a week earlier, figures from the Commodity Futures Trading Commission showed. It’s the first time that speculators were net long on the euro since July.
The European Central Bank cut its main refinancing rate by a quarter-percentage point to 1.25 percent last week. Benchmark rates are 0.1 percent in Japan, 0.5 percent in the U.K. and in a range of zero to 0.25 percent in the U.S.
Rate Differentials
“Investors seem to be focusing on rate differentials, so the fact that the ECB lowered rates by only 25 basis points is positive for the euro,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second- largest lender. “Investors also are becoming more inclined to take on risk, which is leading to euro appreciation.”
Strategists at BNP Paribas, Bank of America-Merrill Lynch and Morgan Stanley advise investors to sell the Canadian dollar before the central bank’s policy report due April 23 on speculation Bank of Canada Governor Mark Carney will join Japanese, Swiss, U.K. and U.S. central bankers and dilute the nation’s currency by printing money to support economic growth, a policy known as quantitative easing.
Canada’s dollar will decline to C$1.27 against the U.S. currency by July, according to the median forecast in a Bloomberg News survey of analysts. The loonie, as the currency is known, lost 0.5 percent to C$1.2357 today.
