BLBG: Yen Falls Against Higher-Yielding Currencies on Recovery Signs
By Bo Nielsen and Yoshiaki Nohara
April 20 (Bloomberg) -- The yen fell against higher- yielding currencies including the Australian dollar as optimism the global economic recovery remains on track boosted demand for riskier investments.
Japan’s currency weakened versus all of its 16 major peers as stocks rose before reports that economists said will show improving German investor confidence and U.S. home sales. Australia’s dollar strengthened after the central bank said concern the nation’s mining boom will stoke inflation spurred policy makers to raise interest rates this month. The Swedish krona climbed against the euro after the nation’s central bank repeated its intention to raise interest rates as soon as July.
“The market is positioned for the yen to become the big loser in the second quarter,” said John Hydeskov, a currency analyst at Danske Bank A/S in Copenhagen. “The developments in the global economy are still conducive for risk appetite and in that environment, the yen will decline.”
The yen weakened to 92.78 per U.S. dollar as of 8:39 a.m. in London, from 92.40 yesterday in New York. Japan’s currency slipped to 124.86 per euro, from 124.64. The euro was at $1.3461, from $1.3489. The yen will trade at about 95 per dollar in a month, Hydeskov said.
Australia’s and Canada’s dollars led the gains versus the yen, rising 1.1 percent to 86.26 yen and 0.7 percent to 91.73 yen, respectively. The MSCI World Index of shares climbed 0.2 percent, with the Stoxx Europe 600 Index gained 0.6 percent.
Yen Weakness
India’s rupee climbed 0.9 percent to 2.085 yen after the central bank raised interest rates for the second time in a month, to 5.25 percent, and ordered lenders to set aside more cash as reserves, seeking to slow the highest inflation rate among the Group of 20 nations.
“As long as the global economic recovery remains on track, stocks will rise and cross currencies should advance against the yen,” said Daisaku Ueno, a Tokyo-based president at Gaitame.Com Research Institute Ltd., a unit of Japan’s largest currency margin company.
The krona appreciated 0.3 percent to 9.65 per euro. The Riksbank reiterated a forecast to boost its seven-day repo rate in “summer or early autumn.” It kept the rate at 0.25 percent today, as predicted in a Bloomberg survey of economists.
German investor confidence increased to 45.1 this month, from 44.5 in March, according to a Bloomberg survey before the ZEW Center for European Economic Research report today in Mannheim, Germany. U.S. existing home sales rose 5.3 percent in March, a separate Bloomberg survey showed before the National Association of Realtors issues the data on April 22.
Aussie Gains
Australia’s dollar rose for a second day versus the yen as traders added to bets the nation’s central bank will increase borrowing costs at its May meeting.
“The fact that the prospective rise in the terms of trade was now likely to be noticeably stronger than had been expected was a factor suggesting that it might be prudent not to delay” raising interest rates, Reserve Bank of Australia officials said in minutes of their April 6 meeting released today in Sydney.
“Given that we’re not quite at the neutral level yet, the RBA is likely to probably hike again in May if the inflation data in particular surprises to the upside,” said Sue Trinh, a senior currency strategist in Hong Kong at Royal Bank of Canada. The minutes are “being seen as supportive for the Aussie dollar,” she said.
There’s a 33 percent chance Australia’s central bank will raise rates when it meets on May 4, according to a Credit Suisse Group AG index. The odds were 21 percent yesterday.
Canadian Dollar
The Canadian dollar rebounded from near a three-week low against the greenback on speculation Bank of Canada Governor Mark Carney will signal the central bank is moving closer to raising interest rates.
The Bank of Canada will hold its benchmark interest rate at 0.25 percent today, according to all 25 economists surveyed by Bloomberg News. The central bank’s monetary-policy report, to be released April 22, may show a shift to a “somewhat more hawkish stance,” according to BNP Paribas SA. Carney signaled last month he’s open to raising the target rate as early as June as inflation and growth outpace forecasts.
“Economic data has continued to how that the Canadian economy is performing strongly, while its main export market in the U.S. shows clear sign of a recovery,” analysts led by Hans- Guenter Redeker, London-based global head of foreign-exchange strategy at BNP Paribas, wrote in a research note today. “We continue to target a move toward 98” U.S. cents, they wrote.
Canada’s dollar traded at C$1.0104 per dollar, from C$1.0144 yesterday, when it touched C$1.0216, the lowest since March 30.
Greece Aid
Gains in the euro were tempered on speculation Greece will require additional funds to resolve its debt crisis, eroding investor confidence in the 16-nation region’s assets.
Bundesbank President Axel Weber told German lawmakers yesterday Greece may need more financial assistance than the 30 billion euros ($40.5 billion) promised by the European Union, two people present at a briefing in Berlin said.
Officials from the EU, the International Monetary Fund and the European Central Bank will begin consultations tomorrow to iron out aid terms. The nation needs to raise almost 12 billion euros to cover bonds maturing in May.
“Greece’s fiscal problem is a long-term issue that is unlikely to be fixed right away,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “It may have to further reduce spending and raise taxes. The bias is still to sell the euro.”
To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
