By Mariko Ishikawa & Neal Armstrong - Jun 13, 2013 11:32 AM GMT+0400
The yen surged 1.1 percent to 94.99 per dollar as of 10:09 a.m. in Tokyo after climbing to 94.89, the strongest since April 4. Photographer: Yuriko Nakao/Bloomberg
The yen surged, strengthening beyond 94 per dollar for the first time in two months, as Japanese investors cut holdings of overseas bonds and stocks for a fourth week and the World Bank lowered its global growth forecast.
The dollar’s volatility against Japan’s currency climbed to the highest in more than two years before U.S. retail-sales data that may provide more direction about when the Federal Reservewill slow stimulus. The Swiss franc rose to the strongest in almost six weeks versus the euro as a slump in stocks fueled demand for perceived safer assets. New Zealand’s dollar dropped against all of its 16 major peers after the central bank signaled the currency remains overvalued.
A currency trader works at a foreign exchange brokerage in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg
June 11 (Bloomberg) -- David Forrester, senior vice-president for Group of 10 foreign-exchange strategy at Macquarie Bank Ltd. in Singapore, talks about the outlook for Asian currencies and his investment strategy. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
June 10 (Bloomberg) -- Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA, talks about the dollar, yen and Mexican peso. He speaks with Mark Barton on Bloomberg Television's "On the Move." (Source: Bloomberg)
The yen surged 1.1 percent to 94.99 per dollar as of 10:09 a.m. in Tokyo after climbing to 94.89, the strongest since April 4. Photographer: Yuriko Nakao/Bloomberg
Japanese domestic money managers sold a net 386.9 billion yen ($4.1 billion) of foreign debt and a net 221.8 billion yen of overseas equities in the week ended June 7, according to figures released by the Ministry of Finance in Tokyo today. Photographer: Tomohiro Ohsumi/Bloomberg
“Japanese stocks are back to levels last seen when the Bank of Japan announced stimulus measures on April 4 and the yen is doing almost exactly the same,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “Global growth being downgraded hasn’t helped risk sentiment today. The pace of the move in the yen and stocks is extreme.”
The yen jumped 2.1 percent to 94.05 per dollar at 8:29 a.m. in London after appreciating to 93.79, the strongest level since April 4. Its 5 percent, three-day advance is set to be the biggest since October 2008. Japan’s currency gained 1.9 percent to 125.67 per euro. The euro rose 0.2 percent to $1.3357 after climbing to $1.3390, the highest since Feb. 20.
A gauge of one-month implied volatility of the dollar-yencurrency pair increased to as high as 18.575 percent, the most since March 2011.
Japanese Sales
Japanese money managers sold a net 386.9 billion yen of foreign bonds and a net 221.8 billion yen of overseas stocks in the week ended June 7, according to figures released today by the Ministry of Finance in Tokyo.
“The market wants evidence of Japanese capital outflow and that evidence is just not there, in fact it’s the opposite,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “Global fund managers who got into short yen trades in the early part of the year are now sitting very nervously watching the volatility in global markets.” A short is a bet an asset’s price will fall.
Japan’s Nikkei 225 (NKY) Stock Average (NKY) of shares slumped 6.4 percent, its third decline of more than 5 percent in the past month percent. Historic volatility is at levels not seen since the 2011 earthquake and nuclear disaster.
World Bank
The world economy will expand 2.2 percent this year, less than a January forecast for 2.4 percent growth and slower than last year’s 2.3 percent, the World Bank said in a report released yesterday in Washington.
The Swiss franc gained 0.3 percent to 1.2247 per euro after appreciating to 1.2223, the strongest level since May 3.
The Dollar Index (DXY) dropped to the lowest in more than three months before U.S. reports today that economists said will show retail sales expanded while the number of people continuing to receive jobless benefits increased.
Sales (RSTAMOM) at U.S. retailers climbed 0.4 percent in May, after gaining 0.1 percent the previous month, according to the median estimate of economists surveyed by Bloomberg News before the Commerce Department releases the data.
Fed Tapering
Fed policy makers next meet on June 18-19. Fed Chairman Ben S. Bernanke said May 22 the central bank could reduce its monthly purchases of $45 billion of Treasuries and $40 billion of mortgage-backed securities if the employment outlook shows a sustainable improvement.
“The FOMC meeting will be the biggest focus and economic data will also be closely watched,” said Koji Iwata, a vice president of foreign-exchange trading at Mizuho Corporate Bank Ltd. inNew York. “The slowing of Fed easing will be a tipping point for dollar-yen. Unless the volatility in the Japanese equity market recedes, the dollar may struggle to push higher.”
The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major trading partners, declined 0.3 percent to 80.673 after dropping to 80.50, the lowest level since Feb. 20.
The New Zealand dollar declined after the central bank left its benchmark rate unchanged at a record-low 2.5 percent and cut economic growth estimates. It maintained its forecast that the three-month bank bill yield would rise to 2.8 percent in the second quarter next year, suggesting no increase to the benchmark until mid-2014.
“This was not quite as hawkish as the market had expected and that’s why the kiwi is selling off,” said Imre Speizer, a markets strategist at Westpac Banking Corp. (WBC) in Auckland. “The market had already priced in a hawkish outcome over the last few days.”
New Zealand’s dollar dropped 0.8 percent to 79.27 U.S. cents after jumping 1.5 percent yesterday.
To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
