Tuesday, April 2, 2013

Yen Rises to Almost Four-Week High on Safety Demand

The yen climbed to the strongest level in almost four weeks against the dollar after a gauge of U.S. manufacturing expanded less than forecast, adding to haven demand and damping bets the Federal Reserve might slow its bond- buying under quantitative easing.


The euro fell versus the yen before data tomorrow that may show unemployment in the bloc climbed to a record, two days before the European Central Bank announces an interest-rate decision. Australia’s dollar reached a one-week low as China’s factory output trailed estimates.

Japan’s currency climbed versus all of its 16 most-traded peers before the nation’s central bank opens a policy meeting this week.

“Most of what you’re seeing today is really based off the back of the poorer-than-expected U.S. numbers,” Douglas Borthwick, a managing director and head of foreign exchange at Chapdelaine FX in New York, said in a telephone interview.

“Any expectation of the U.S. stepping back from QE should be tempered somewhat.”

The Japanese currency appreciated 1.1 percent to 93.23 yen per dollar at 5 p.m. in New York and reached 93.16, the strongest since March 6.

The yen gained 0.8 percent to 119.79 per euro and touched 119.51, the highest since Feb. 27. The euro strengthened 0.2 percent to $1.2849 after falling earlier as much as 0.4 percent.

BOJ Meeting

Bank of Japan (8301) Governor Haruhiko Kuroda will preside over his first policy meeting April 3-4. He said in testimony to parliament last week he wants to achieve a 2 percent inflation target in two years.

The BOJ needs to tackle deflation decisively and will take all necessary actions, Kuroda said in the text of a speech.

“Obviously the big move today is in yen,” Greg Anderson, North America head of Group of 10 currency strategy at Citigroup Inc., said by telephone from New York.

“You can interpret that as the market backing off of their yen shorts ahead of the BOJ. It wouldn’t shock me too much to see this continue, and you might even get to 92.50.”

Short positions are bets a currency will weaken. The yen lost 4.2 percent over the past three months against nine developed-nation peers tracked by Bloomberg Correlation- Weighted Indexes.

The euro gained 0.2 percent, and the dollar appreciated 3.2 percent. Traders increased bets against the yen and the euro in the week ended March 26.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on an advance, so-called net shorts, was 89,149, up from 79,993 over the previous week, according to figures from the Commodity Futures Trading Commission.

Bearish bets on the euro climbed to 49,095 over the same period, the most since the week ended Nov. 30.

Fed Bets

The Standard & Poor’s 500 Index fell 0.5 percent today. Financial markets in Europe, Australia and Hong Kong were closed for holidays.

The euro rose versus the dollar amid bets the Fed won’t be quick to taper monetary stimulus after the manufacturing data, said Sebastien Galy, a foreign-exchange strategist at Societe Generale SA in New York.

The U.S. central bank is buying $85 billion of bonds a month under its QE strategy to spur growth, which may debase the dollar.

Fed Chairman Ben S. Bernanke, told reporters March 20 after a policy meeting the pace of asset purchases may be altered if the economy continues to heal.

Factory Figures

The Institute for Supply Management’s factory index fell to 51.3 in March, the Tempe, Arizona-based group’s figures showed. The 2.9-point decline was the biggest since July 2011.

The gauge reached 54.2 in February, the highest level since June 2011. Fifty is the dividing line between expansion and contraction. A Bloomberg survey forecast a reading of 54.

Australia’s dollar reached the lowest since March 21 versus its U.S. peer after a gauge tracking manufacturing in China, the South Pacific nation’s biggest trading partner, was at 50.9 last month, trailing a Bloomberg survey forecast of 51.2.

The Aussie was little changed at $1.0423 after falling earlier to $1.0386. The Hungarian forint advanced versus most of 31 major counterparts after the International Monetary Fund said the country should pause with monetary easing. It strengthened 0.3 percent to 236.51 to the dollar.

Unemployment in the euro area probably climbed to a record 12 percent in February, according to a Bloomberg News survey of economists before the European Union’s statistics office releases the report tomorrow.

ECB Outlook

ECB President Mario Draghi and his fellow policy makers will probably keep the euro area’s benchmark interest rate at a record-low 0.75 percent at a meeting April 4, according to analysts surveyed by Bloomberg.

“We think that the euro will remain under pressure,” Sireen Harajli, a foreign-exchange strategist in New York at Credit Agricole SA, said in a telephone interview.

“Weaker growth and inflation expectations in Europe will probably lead Draghi to sound more dovish this week.”

The euro now has a bearish bias, having fallen below a support zone from $1.2840 to $1.2870, Niall O’Connor, a technical analyst at JPMorgan Chase & Co. in New York, wrote today in a note to clients.

The shared currency may decline to $1.2660, O’Connor said, which would be its weakest level since Sept. 7. Support is an area on a chart where analysts anticipate buy orders may be clustered.

bloomberg.com

No comments: