SF: Yen Declines as Global Recovery Signs Reduce Demand for Refuge
March 31 (Bloomberg) -- The yen touched an almost eight- week low versus the euro as signs the global recovery is gathering steam damped demand for Japan's currency as a refuge.
The Japanese currency headed for its biggest monthly drop in a year versus the euro before a report tomorrow that may indicate confidence among Japan's large manufacturers increased, boosting appetite for investments in countries with higher long- term interest rates. The franc climbed against the euro as Swiss leading economic indicators rose in March to the highest level since November 2007.
"There's a tremendous amount of pressure to push the yen lower in the next few days," said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. "The market is expecting Japanese institutional investors to be chasing steepness in yield curves globally in relatively safe places."
The yen depreciated 1.1 percent to 125.80 per euro at 10:18 a.m. in New York, from 124.44 yesterday, after touching 125.98, the weakest level since Feb. 4. It slipped 0.3 percent to 93.05 per dollar, from 92.76, after reaching 93.60, the weakest since Jan. 8. The euro strengthened 0.8 percent to $1.3519, from $1.3414.
U.S. 10-year note yields have climbed 63 basis points, or 0.63 percentage point, to 3.82 percent since the end of November. Yields on comparable Japanese benchmarks rose 14 basis points to 1.395 percent.
Monthly Drop
The Japanese currency was poised for a 3.6 percent loss versus the euro this month, the biggest since it tumbled 5.7 percent in March 2009. The yen headed for a 4.4 percent drop against the greenback, its biggest monthly decline this year.
The yen pared losses against the dollar and euro today after a report showed companies in the U.S. unexpectedly cut payrolls in March and a business gauge fell. The 23,000-position decline shown today by data from ADP Employer Services compared with a gain of 40,000 forecast in a Bloomberg News survey. The Institute for Supply Management-Chicago Inc. said its index declined to 58.8 this month, from 62.6 in February.
Today's advance by the euro pared its loss against the dollar in the first quarter to 5.6 percent. The drop, on concern Greece's debt crisis will derail the region's economic recovery, would still be the worst performance since an 11 percent decrease in the three months ended September 2008.
U.S. Rate Bets
Futures on the CME Group Inc. exchange showed a 57 percent chance the Federal Reserve will raise its target rate for overnight lending between banks by at least a quarter-percentage point by its November meeting, compared with 48 percent odds a month ago. The Fed has kept the target interest rate in a range of zero to 0.25 percent since December 2008.
The U.S. Labor Department's nonfarm jobs report on April 2 is forecast to show employers added 180,000 positions, the most in three years, a Bloomberg survey of 81 economists shows.
"The market is more confident about the U.S. and increasing its probability and its thinking about the timing and the extent of Federal Reserve interest-rate increases," said Ray Farris, London-based head of foreign-exchange strategy at Credit Suisse Group AG.
The Bank of Japan will say in its Tankan survey tomorrow that confidence among Japanese large manufacturers was minus 14 in the three months ended in March, up from minus 24 in the prior quarter, according to the median forecast of 23 economists in a Bloomberg survey. A negative number means pessimists outnumber optimists.
'Not in Demand'
"In an environment where the global economy seems to be recovering and stock markets are not providing any cause for concern, the yen is not in demand as a safe haven," strategists led by Ulrich Leuchtmann at Commerzbank AG in Frankfurt wrote in a research note today.
The Swiss franc gained 0.2 percent to 1.4277 per euro, extending its advance so far this year to 3.8 percent.
The KOF Index's monthly aggregate of indicators predicting the Swiss economy's direction about six months ahead increased to 1.93 this month from a revised 1.9 in February, the Zurich- based research institute said in a statement today.
Australia's dollar fell for the first time in three days, dropping as much as 0.7 percent to 91.31 U.S. cents. The Bureau of Statistics said the nation's retail sales tumbled 1.4 percent in February. Economists in a Bloomberg News survey forecast a 0.3 percent increase.
"That was a very awful set of retail sales numbers with broad-based losses," said Sue Trinh, a senior currency strategist at RBC Capital Markets in Hong Kong. "Aussie has collapsed on the number, and I'd expect that to continue given that a large factor causing the Aussie's outperformance in the past week has been expectations of a rate hike next week."
The Australian dollar has climbed 2.2 percent against the greenback this quarter after Reserve Bank of Australia Governor Glenn Stevens raised the benchmark cash target in March to 4 percent. Traders are betting on 1.22 percentage points in further increases over the next 12 months, according to a Credit Suisse index based on swaps trading.
