BLBG: Yen Advances as Stock Declines Spur Investor Demand for Refuge
By Matthew Brown and Ron Harui
Aug. 4 (Bloomberg) -- The yen rose as traders scaled back bets on higher-yielding currencies and stocks snapped three days of gains, fueling demand for the Japanese currency as a haven.
The yen advanced most against the Swedish krona and South African rand as Standard Chartered Plc said it plans to raise $1.69 billion in a share sale and Yamaha Motor Co., the world’s second-largest maker of motor bikes, forecast a wider loss. The euro weakened versus the dollar after a report showed producer prices fell at a record pace. The Australian dollar fell after the Reserve Bank of Australia kept interest rates at the lowest level in half a century.
“Equities are weaker and the yen crosses haven’t broken through the top of their ranges, so people are happy to take a breather from that trade,” said Daragh Maher, deputy head of global foreign-exchange strategy in London at Calyon, the investment-banking unit of Credit Agricole SA.
The yen strengthened to 136.38 per euro as of 6:24 a.m. in New York, from 137.31 yesterday, and to 94.71 per dollar, from 95.26. The euro traded at $1.4396, from $1.4412 yesterday, when it rose to $1.4445, the strongest since Dec. 18.
Europe’s Dow Jones Stoxx 600 Index fell 0.8 percent after trading at its highest level relative to profits since 2003. The MSCI World Index declined 0.2 percent.
The yen also gained on speculation Japanese exporters are taking advantage of the currency’s decline against the euro and the dollar to bring home income from abroad. The yen has dropped 7.1 percent compared with the euro this year and 4.2 percent versus the dollar.
‘Attractive Level’
“It’s natural that exporters will likely buy the yen after the currency attained an attractive level for them,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “The pace of yen weakness will probably slow down.”
The euro fell against the yen, the dollar and the pound after the European Union’s statistics office in Luxembourg said factory-gate prices in the 16-nation region dropped 6.6 percent in June from a year earlier, the biggest decline since the data series began in 1981,
The European Central Bank must avoid complacency and be ready to fight deflation if it occurs, the International Monetary Fund said in a report last week. The ECB also shouldn’t consider its benchmark interest rate of 1 percent as a “floor,” said Marek Belka, director of the IMF’s European Department, on July 30.
ECB Meeting
The ECB will leave the rate unchanged when it meets on Aug. 6, according to all 52 economists in a Bloomberg News survey.
The single European currency weakened 0.2 percent against the pound to 84.97 pence. It also dropped versus the South Korean won and the Taiwanese dollar.
UBS AG, Switzerland’s biggest bank by assets, reported a third straight quarterly loss. Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, reported a 76 percent drop in profit.
“I don’t think there’s going to be a sharp bounce back” in the global economy, HSBC Holdings Plc Chairman Stephen Green said today in a Bloomberg Television interview. “When the bottom is reached it’ll be followed by pretty anemic growth.”
The Australian dollar fell for the first time in four days versus the U.S. currency after the country’s central bank kept its key interest rate at 3 percent and said the economy is likely to remain “sluggish.”
The nation’s benchmark rate compares with 2.5 percent in New Zealand, 0.1 percent in Japan and as low as zero in the U.S.
‘Selling Australian Dollar’
“Many people are expecting there won’t be a rate hike for a while,” said Shinichi Hayashi, a Tokyo-based dealer at Shinkin Central Bank, the central institution for Japan’s financial cooperatives. “There’s some selling of the Australian dollar.”
The Australian currency fell 0.3 percent to 84.00 U.S. cents, and 0.8 percent to 79.55 yen.
Demand for higher-yielding currencies may increase should U.S. reports today add to evidence of a recovery in the world’s biggest economy, according to Jane Foley, research director in London at Forex.com, an online currency trader.
U.S. consumer spending gained 0.3 percent in June after a 0.3 percent increase in May, a Bloomberg economists’ survey showed before the Commerce Department’s report. Pending home resales rose 0.7 percent in June after a 0.1 percent gain in May, a separate Bloomberg News survey showed before the National Association of Realtors’ report.
“A good set of numbers could renew the risk trade,” said Foley. “Stock markets will continue to lend direction.”
To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
