BLBG: Yen Rises as Fire at Japan Nuclear Plant Spurs Repatriation; Dollar Gains
The yen rose versus a majority of its most-traded counterparts as Japan’s Prime Minister Naoto Kan said the danger of further radiation leaks from a crippled nuclear power station is increasing, boosting speculation domestic investors will bring home overseas assets.
The dollar and Swiss franc advanced amid demand for safe havens after Kan appealed for calm in a televised address. He said his government is doing its utmost to contain the radioactive leak at Tokyo Electric Power Co.’s Fukushima Dai- Ichi plant following last week’s earthquake and tsunami. Asian currencies retreated, led by Malaysia’s ringgit, as stocks plunged and Treasuries climbed amid demand for the relative safety of U.S. assets.
Risk aversion is climbing as we monitor the news flow from the nuclear plants,” said Jeremy Stretch, executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “It’s very much a case of looking at risk-off currencies, such as the dollar and franc. The yen’s benefited as Japanese investors close out positions against the Australian and New Zealand dollars.”
Japan’s currency appreciated to 113.54 per euro as of 8:17 a.m. in London from 114.22 in New York yesterday. The yen traded at 81.55 per dollar from 81.63. The greenback strengthened 0.5 percent to $1.3923 per euro. The 17-nation common currency weakened 0.8 percent to 1.2835 per franc.
‘Very Sensitive’
The stricken Dai-Ichi nuclear power plant was rocked by two further explosions and a fire today as workers struggled to avert the risk of a meltdown.
A hydrogen blast hit the plant’s No. 4 reactor, where Tokyo Electric earlier reported a blaze, Japan’s Chief Cabinet Secretary Yukio Edano said at a briefing. Four of the complex’s six reactors have been damaged by explosions after cooling systems failed when they were wrecked by the magnitude 9 earthquake and deadly tsunami.
“Foreign investors are very sensitive to the nuclear issue,” said Kengo Suzuki, a currency analyst in Tokyo at Mizuho Securities Co., a unit of Japan’s second-largest publicly traded lender. “People are buying the dollar as a safe haven and may seek a refuge in the Swiss franc too.”
The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, gained 0.5 percent to 76.705. The franc rose 0.4 percent to 1.2886 per euro.
Gains in the yen were limited as the Bank of Japan pumped more money into financial markets.
Asia Sentiment
The BOJ added 5 trillion yen to the financial system in a one-day operation today. BOJ Governor Masaaki Shirakawa has pledged to keep pouring cash into the economy to stabilize markets. The bank injected 15 trillion yen yesterday and doubled its asset-purchase program to 10 trillion yen.
“The BOJ has made bold moves and clearly pledged to keep doing so,” said Misato Nakashima, a currency analyst at Himawari Securities Inc. in Tokyo. “The yen will be under downward pressure in the mid- to long-term as the central bank has no choice but to maintain monetary easing for a long time.”
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most traded currencies excluding the yen, dropped to the lowest level this month as the MSCI Asia Pacific Index slumped 5.4 percent. The Nikkei 225 (NKY) Stock Average dropped as much as 14 percent, entering a bear market.
Manufacturing Data
“Sentiment, not only for Japan but for the whole of Asia, is weak at this stage,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp.
The ringgit declined 0.7 percent to 3.0588 per dollar, according to data compiled by Bloomberg. South Korea’s won and the Philippine peso weakened 0.5 percent each.
The dollar also strengthened before a report today forecast to show manufacturing in the region covered by the Federal Reserve Bank of New York expanded this month at the fastest pace since June. Separate Fed figures to be released March 17 will show output at factories, mines and utilities climbed in February, according to a Bloomberg News survey.
The U.S. currency extended gains on speculation the Fed, meeting today, will acknowledge the labor market is improving.
“We only need some hawkish news out of the U.S., or some positive sentiment, for the dollar to turn around,” said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. “In the medium-term, I am positive for the U.S. dollar.”
To contact the reporters on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
