BLBG: Yen Trades Near Seven-Week Low Against Euro on Stock Gains, U.S. Economy
The yen traded near a seven-week low versus the euro as U.S. data pointed to signs of recovery in the world’s largest economy, supporting demand for riskier assets.
Japan’s currency dropped against 15 of its 16 major counterparts after a U.S. report showed new-home sales climbed more than economists expected while figures tomorrow are forecast to show orders for durable goods rose last month. Australia’s dollar held above 90 U.S. cents and New Zealand’s was near its strongest since January on expectations reports this week will show both economies are gaining momentum, pressuring policy makers to raise interest rates.
“Excessive pessimism in the U.S. that stoked expectations for monetary easing last week has waned,” said Toshiya Yamauchi, senior currency analyst in Tokyo at Ueda Harlow Ltd. “The bias is for cross currencies to rise against the yen.”
The yen traded at 113.12 per euro at 6:45 a.m. in London from 112.89 in New York yesterday, when it touched 113.48, the lowest since June 3. The yen fetched 86.97 per dollar from 86.88. The dollar was at $1.3007 per euro from $1.2994.
The MSCI Asia Pacific Index of regional shares rose 0.4 percent. The Dow Jones Industrial Average erased this year’s decline and advanced 1 percent yesterday after FedEx Corp., the second-largest U.S. package-shipping company, raised its earnings forecast for this quarter and the full year on improving demand for express and ground deliveries.
Stocks Correlation
Europe’s common currency tends to gain when stocks advance. The euro’s value versus the yen had a correlation of 0.86 with the MSCI Asia Pacific Index in the past three months, Bloomberg data showed. A reading of 1 would mean the two moved in lockstep.
New U.S. home purchases increased 24 percent in June from May, the Commerce Department said yesterday. The median forecast of economists in a Bloomberg survey was for an advance of 3.3 percent. U.S. durable goods orders gained 1 percent in June after falling a revised 0.6 percent the previous month, another survey showed before the data’s release.
Federal Reserve Bank of Philadelphia President Charles Plosser said it’s too soon for the Fed to bolster record U.S. monetary stimulus in response to slower-than-forecast gains in economic growth and employment.
“Talk of new efforts to stimulate the economy are premature right now,” Plosser said yesterday in an interview with Bloomberg News in Washington. “I don’t think the data have been sufficiently compelling one way or another.”
The euro has dropped 7.9 percent this year, the biggest loss among its developed-world counterparts, according to Bloomberg Correlation-Weighted Indexes. The dollar is up 2.5 percent, and the yen has advanced 11 percent.
Australia Consumer Prices
Australia’s statistics bureau is forecast to report tomorrow that consumer prices increased in the second quarter at the quickest pace since September 2009. New Zealand’s central bank will raise borrowing costs on July 29, according to a Bloomberg survey of economists.
“The risk to the Australian and New Zealand dollars is for further strength in the short term,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Wednesday’s CPI looks to be very important in shaping expectations for future RBA policy.”
Australia’s dollar bought 90.21 U.S. cents from 90.26 cents yesterday, when it reached 90.36 cents, the most since May 11. New Zealand’s dollar fetched 73.44 U.S. cents from 73.38 cents, after touching 73.55 cents yesterday, the most since Jan. 20.
The nation’s annual trade balance widened to NZ$729.5 million ($536 million) in the 12 months ended June 30, from a NZ$91 million surplus in the year through May, economists forecast before the statistics bureau report on July 29.
Obon Season
The yen was supported on speculation exporters will buy the currency before Japan’s Obon period, when many individuals take time off during the second week of August to honor ancestors.
“Exporters may purchase the yen ahead of the summer holidays,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “This would be a yen-positive factor.”
Japan’s large manufacturers expect the yen to average 90.16 against the dollar in the six months to March 2011, according to the Bank of Japan’s Tankan survey released July 1.
Nomura Securities Co. cut forecasts for the dollar against the yen, citing a slowing U.S. economy and expectations the Fed won’t raise interest rates until the first half of 2011.
Nomura expects the dollar to trade at 90 yen by the third quarter of this year from 95 yen previously, it said in a research note dated yesterday. The greenback will finish 2010 at 87.5 yen from an earlier estimate of 97 yen. The brokerage left its fourth-quarter 2011 forecast unchanged at 90 yen.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
