BLBG; Yen Rises Versus Euro as Economic Outlook Spurs Safety Demand
The yen rose against the euro on speculation the worst of the global economic slump isn’t over, encouraging demand for a refuge.
Japan’s currency strengthened against the South Korean won and the Swedish krona as Alcoa Inc. opened the earnings season yesterday by reporting a second straight quarterly loss, reducing the appeal of higher-yielding assets. The U.K. economy shrank 1.5 percent in the first quarter, and German exports dropped for a fifth month in February, reports showed today.
“Things are not better,” said Brian Kim, a currency strategist in Stamford, Connecticut, at UBS AG, the second- largest currency trader. “There’s still bad news to be coming in.”
The yen advanced 0.4 percent to 132.76 per euro at 9:12 a.m. in New York, from 133.29 yesterday. The dollar traded at $1.3251 per euro, compared with $1.3272. It touched $1.3148, the strongest level since March 30. The yen gained 0.3 percent to 100.16 per dollar from 100.42. The euro will probably fall to $1.30 in a month, Kim predicted.
Profits at companies in the S&P 500 may have fallen 37 percent in the first quarter, according to estimates from more than 1,700 securities analysts compiled by Bloomberg. Alcoa, the first Dow Jones Industrial Average company to post results for the first quarter, reported its first back-to-back quarterly losses since the three months ended in March 1994.
The yen increased 2.6 percent to 13.5171 South Korean won and 0.4 percent to 12.22 versus Sweden’s krona. Futures on the Standard & Poor’s 500 Index erased losses, gaining 0.3 percent.
‘Fragile’ Euphoria
“With the basis for the recent euphoria about the global economy and stock markets still looking to be fragile, I want to take profits on recent gains before major events in the U.S. such as corporate profit announcements,” said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp.
The yen rose for a second day against the dollar, the first back-to-back gain in almost three weeks, on speculation General Motors Corp. is speeding up preparations for a possible bankruptcy filing.
The Detroit-based automaker would focus on forming a new company from its best assets if court protection is needed, people familiar with the plans said, asking not to be named because the details aren’t public. A GM spokesman, Greg Martin, declined to comment on April 6.
Outlook for GM
“The potential collapse of GM is definitely negative for the dollar,” said Kengo Suzuki, a currency strategist in Tokyo at Shinko Securities Co., a unit of Japan’s second-largest banking group.
The U.K. economy contracted in the first quarter as the recession increasingly resembled the slump that started in 1979 when Margaret Thatcher became prime minister, the National Institute of Economic and Social Research said.
Sales of German goods abroad fell 0.7 percent from January, when they slipped a revised 7.4 percent, the Federal Statistics Office in Wiesbaden said today.
Gains in the yen may be tempered before a Japanese report tomorrow that economists say will show machinery orders declined for a fifth month.
“Japan’s economy is in bad shape,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-largest lender. “There is no reason to buy the yen right now.”
Machine Orders
Machine orders, an indicator of capital investment in the next three to six months, dropped 6.9 percent in February from the previous month, according to a Bloomberg News survey before the release of the statistics bureau report.
Japan’s current-account surplus narrowed in February as the recession eroded demand for the nation’s exports. The surplus shrank 55.6 percent to 1.117 trillion yen ($11 billion) from a year earlier, the Ministry of Finance said today. Japan reported a current-account deficit in January.
The euro will decline against the dollar to this year’s low of $1.2457 reached on March 4 should the currency fail to remain above so-called support at $1.3043, said Masashi Hashimoto, a senior analyst at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest banking group.
The support level is the 65-day moving average, Tokyo-based Hashimoto said. Daily momentum indicators such as the moving average convergence/divergence and the stochastic oscillator are also showing sell signals for the euro versus the yen, Hashimoto said in a research note today. Support is where buy or sell orders may be clustered.
