BLBG: Yen Retreats From Near 15-Year High on Global Recovery Signs; Dollar Gains
The yen retreated from near a 15-year high against the dollar as signs the worldwide economic recovery is gathering momentum boosted Asian shares, sapping demand for the Japanese currency as a refuge.
The yen fell for a third day versus South Korea’s won after Australian figures showed the services industry expanded for the first time in six months and before a U.S. report that may show non-manufacturing businesses grew at a faster pace. The dollar rose versus 11 of 16 major counterparts after U.S. networks predicted Republicans won enough elections to capture a U.S. House majority, fueling speculation they will advance policies favorable to businesses.
“Against a backdrop of upbeat economic data and buoyant equity market sentiment, investors are trimming positions in safe-haven currencies such as the yen and the dollar,” said Mike Jones, a foreign-exchange strategist at Bank of New Zealand Ltd. in Wellington. “Trading is expected to be subdued as players square positions and reduce risk exposure heading into the Fed’s decision.”
Japan’s currency traded at 80.64 per dollar at 2:59 p.m. in Tokyo from 80.63 in New York yesterday, after reaching 80.22 on Nov. 1, the highest level since April 1995. It was at 112.93 per euro from 113.15 yesterday, when it fell to 113.48, the weakest since Oct. 25.
The greenback rose to $1.4006 per euro from $1.4034 yesterday, when it touched $1.4058, the lowest since Oct. 25. The yen declined to 13.772 South Korean won from 13.813. Japan’s financial markets are closed for a national holiday today.
Asian Stocks Gain
The MSCI Asia Pacific Index of regional shares rose 0.6 percent. Benchmark interest rates are 2.25 percent in South Korea and 4.75 percent in Australia, compared with as low as zero in the U.S. and Japan, making the nations’ higher-yielding assets attractive to investors.
Australia’s dollar was just short of parity with the U.S. currency after Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today the performance of services index rose 5.1 points to 50.7 in October, the highest since April. A figure above 50 indicates expansion. Demand for the Aussie weakened after Bureau of Statistics data showed home- building approvals fell in September.
The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the U.S. economy, rose to 53.5 in October from 53.2 in September, according to a Bloomberg News survey of economists before today’s report.
Australia’s currency bought 99.79 U.S. cents from 99.95 cents yesterday when it touched $1.0024.
U.S. Elections
The greenback advanced against the euro as CNN, CBS and MSNBC forecast that Republicans would take control of the U.S. House and narrow the Democrats’ hold on the Senate seats in midterm elections.
“As the results of the elections stream in, the Republicans are likely to win the House,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “I would think this is positive for the dollar. They may be more pro- business.”
With polls showing Americans frustrated with the slow pace of economic recovery and the 9.6 percent unemployment rate, Republicans are expected to easily achieve the net gain of 39 seats needed to reach the majority in the 435-seat House.
Gains in the dollar may be limited on prospects the Fed will buy more government debt to support the economic recovery. The U.S. central bank will probably announce at the end of a two-day meeting today a plan to purchase at least $500 billion of long-term securities, a Bloomberg survey showed.
‘Anything Less’
“Anything less than that and you may see a knee-jerk sell- off of the Aussie and a U.S. dollar rally,” said Tim Kelleher, vice-president of institutional banking and markets at Commonwealth Bank of Australia in Auckland. “The risk is we’ll see a little profit-taking ahead of the Fed.”
The Dollar Index, which tracks the dollar versus the currencies of six major U.S. trading partners including the euro, increased 0.1 percent to 76.825. It touched 76.636 yesterday, the least since Oct. 15.
Taiwan’s dollar strengthened to a two-year high on speculation the Fed will expand easing. The currency also rose after overseas investors added to purchases of the island’s equities, buying $925 million more than they sold in the past two days and taking the year’s total to $5.6 billion.
“The Fed’s easing adds to the trend that the Taiwan dollar will rise because of hot-money inflows,” said Eric Hsing , a bond trader at First Securities Inc. in Taipei. “The central bank will continue to slow the currency’s gain.”
The Taiwan dollar rose 0.9 percent to NT$30.429 against its U.S. counterpart, according to Taipei Forex Inc. The currency reached NT$30.375 earlier, the strongest level since July 2008.
To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
