Tuesday, 3 July 2012

Yen, Dollar Fall as Asian Stocks Gain; Aussie Advances

By Mariko Ishikawa and Masaki Kondo 
July 03, 2012 2:01 AM EDT
The yen fell against all its major peers as Asian stocks rose for a fifth day amid speculation central banks will take more action to spur growth, reducing demand for haven assets.

The dollar also slid before U.S. factory and employment data that companies from Bank of New Zealand Ltd. to Bank of Tokyo-Mitsubishi UFJ Ltd. say may add to the case for stimulus by the Federal Reserve that devalues the currency. European Central Bank officials are forecast to cut their main interest rate to an all-time low on July 5. Australia’s dollar reached a two-month high after data showed building approvals surged by a record and the central bank left interest rates unchanged.

“The yen is being sold as risk aversion eases,” Masakazu Sato, a foreign exchange adviser for Gaitame Online Co. in Tokyo. “The market is pricing in a rate cut by the ECB. Better- than-expected economic data out of China and Australia are stoking yen selling against the crosses.”

The Japanese currency weakened 0.4 percent to 100.42 per euro as of 6:31 a.m. in London. 
The yen lost 0.3 percent to 79.72 per dollar. The greenback slid 0.2 percent to $1.2599 per euro from yesterday, when it advanced 0.7 percent. The Australian dollar added 0.1 percent to $1.0260 after reaching $1.0285, the highest since May 3.

The MSCI Asia Pacific Index of stocks advanced 0.8 percent, after climbing 2.7 percent last week.

U.S. factory orders probably rose 0.1 percent in May after a 0.6 percent drop the previous month, according to the median estimate of economists surveyed by Bloomberg News before the Commerce Department releases its data today.

U.S. Manufacturing

The Institute for Supply Management’s gauge of manufacturing fell to 49.7, worse than the most-pessimistic forecast in a Bloomberg poll, from 53.5 in May, the Tempe, Arizona-based group said yesterday. Figures less than 50 signal contraction. Measures of orders, production and export demand dropped to three-year lows.

“The U.S. economy has been losing steam,” said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. “Signs of a more aggressive slowdown are negative for the U.S. dollar insofar as they elicit another round of quantitative easing from the Fed.”

Employers probably increased payrolls by 90,000 workers last month after a 69,000 gain in May, according to economists in a separate Bloomberg survey ahead of Labor Department figures due July 6.

Payrolls Data

“I think with a 90,000 increase in non-farm payrolls, the unemployment rate will rise,” said Noriaki Murao, managing director of the marketing group in New York at the Bank of Tokyo-Mitsubishi UFJ Ltd. “The U.S labor market is flashing a red light, with the prospects of QE3 rising.”

The Fed bought $2.3 trillion of bonds in two rounds of so- called quantitative easing, or QE, from December 2008 to June 2011, seeking to reduce unemployment rate which has remained above 8 percent since February 2009. The central bank will increase its asset purchases in September, according to Bank of America, one of the 21 primary dealers that trade directly with the Fed.

In China, the purchasing managers’ index of non- manufacturing rose to a three-month high of 56.7 in June from 55.2 in May, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing today.

In Australia, the number of permits granted to build or renovate houses and apartments jumped a record 27.3 percent from April, when they declined a revised 7.6 percent, the Bureau of Statistics said in Sydney. The median estimate of economists in a Bloomberg survey was a 5 percent gain.

The Reserve Bank of Australia kept its cash-rate target at 3.5 percent at a policy meeting today, matching expectations by economists.

Swedish Krona

The euro’s decline against the Swedish krona may be tempered after it reached key support levels, according to Skandinaviska Enskilda Banken AB.

The 17-nation euro has entered a “support zone” at 8.7430 to 8.7650 krona, analysts Anders Soderberg and Dag Muller wrote in a research note yesterday. Support is an area on a chart where orders to buy may be clustered.

The euro was little changed against the krona at 8.7182 from yesterday, when it touched 8.7104, the weakest since March 1, 2011.

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.