By Andrea Wong - Aug 30, 2013 8:34 AM PT
The yen gained against the majority of its 16 most-traded peers as investors bet the financial turmoil that has weighed on emerging-market assets in August has more to run, fueling demand for Japan’s currency as a haven.
The yen strengthened versus all but one of its major counterparts this week even as the threat of U.S.-led military action against Syria receded. The euro fell to a one-month low versus the dollar. Norway’s krone weakened for third day against the dollar after retail sales fell last month and unemployment climbed in August. India’s rupee headed for its biggest monthly loss in 20 years on concern a deepening economic slowdown will deter investors.
Aug. 30 (Bloomberg) -- Kathleen Brooks, a research director at Forex.com, talks about the possible impact on financial markets of U.S. action in Syria and India's food program and its effect on the rupee. She speaks with Anna Edwards and Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
“This week has been obviously risk-off, calibrated by a stern speech in regards to Syria,” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc. (8411), said in a phone interview. “Demand for yen was higher earlier in the week. The market was net-long dollar-yen and it triggered some stop-loss trades.” A long position is a bet an asset will increase in value, while a stop-loss is a pre-set order to sell when an asset reaches to a specific threshold.
The yen rose 0.5 percent to 129.56 per euro at 11:34 a.m. in New York, having appreciated 1.9 percent this week. Japan’s currency advanced 0.2 percent to 98.17 per dollar, set for a gain of 0.6 percent this week. The dollar climbed 0.3 percent to $1.3213 per euro after touching $1.3174, the strongest level since July 25.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 other major currencies, rose 0.1 percent to 1,034.80. It was headed for a 0.8 percent gain in August, the largest monthly gain since May.
U.S. financial markets will be shut Sept. 2 for Labor Day.
Syria Concern
The currencies of India, Mexico and Turkey have all slid more than 2 percent against the dollar this week as speculation the Federal Reserve is moving toward reducing stimulus sapped demand for higher-yielding assets, and the prospect of expanded conflict in the Middle Eastdamped risk-taking.
France signaled it might act as the principal U.S. ally in a military strike against Syria, filling a hole left by Britain after U.K. lawmakers rejected a mission to punish Syria’s use of chemical weapons. French President Francois Hollande said he still favors delivering a targeted blow, bypassing the United Nations Security Council if needed.
“The general concerns about emerging markets haven’t gone away,” said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in London. “As long as risk is off, the yen could strengthen further on unwinding of short positions. The fire is still burning and it appears that the cycle is not over yet.”
Krone, Rupee
The yen strengthened 1.8 percent this week, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 1.1 percent, while the euro slipped 0.4 percent.
The krone dropped versus all except two of its 16 major counterparts today after Statistics Norway said retail sales excluding motor vehicles slumped 1.3 percent in July.
Seasonally adjusted unemployment climbed to 70,210 this month from 69,284 in July, according to the Norwegian Labor and Welfare Service.
The krone weakened 0.2 percent to 8.0859 per euro and dropped 0.5 percent to 6.124 per dollar.
India’s rupee gained 1.3 percent to close at 65.705 per dollar in Mumbai after slumping to a record 68.8450 on Aug. 28. The currency has declined 8.1 percent this month, the most since March 1992.
‘Negative Feedback’
“Markets are increasingly concerned about a negative feedback loop between the rupee and India’s fundamentals,” analysts at Standard Chartered Plc, including Mumbai-based Samiran Chakraborty, wrote in a research report yesterday. “That said, we think that worries about a 1991-style balance-of-payments crisis are exaggerated.”
India is liaising with other emerging markets on a plan to coordinate offshore currency interventions, Reuters reported, citing Dipak Dasgupta, India ministry’s principal economic adviser. Brazil central-bank’s press officer Gustavo Paul later said “there is no initiative of that sort.”
The U.S. currency headed for a weekly advance versus 11 of its 16 major peers after a report yesterday showed the economy grew faster in the second quarter than analysts predicted.
The dollar briefly fell after personal spending, which accounts for about 70 percent of the economy, rose 0.1 percent after a revised 0.6 percent increase the prior month that was larger than previously estimated, the Commerce Department reported today in Washington. The median forecast in a Bloomberg survey of economists called for a 0.3 percent rise. Incomes increased 0.1 percent.
Fed policy makers are debating whether the economy is strong enough to allow them to pare monthly purchases of $85 billion in Treasuries and mortgage debt. Officials will reduce the amount at their next meeting on Sept. 17-18, according to 65 percent of economists in an Aug. 9-13 Bloomberg survey.
To contact the reporter on this story: Andrea Wong in New York at awong268@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
