Tuesday, 27 August 2013

Yen Rises as Emerging-Market Currencies Slide; Aussie Weakens

By Lukanyo Mnyanda & Kevin Buckland - Aug 27, 2013 5:43 AM PT
The yen strengthened the most in almost eight weeks against the euro as a slide in emerging-market currencies boosted demand for safer investments.
Japan’s currency gained at least 0.8 percent versus all of its 16 major peers, while the Swiss franc rose against all but two. India’s rupee and Turkey’s lira both dropped to records and Asian and European stocks slumped amid escalating tension in Syria. The Australian and New Zealand dollars fell as a gauge of currency volatility climbed to a six-week high. The Bloomberg U.S. Dollar Index rose for a second day amid speculation the Federal Reserve is poised to reduce stimulus.
Aug. 27 (Bloomberg) -- Kit Juckes, global strategist at Societe Generale SA, discusses the performance of and outlook for the South Korean won. He spoke Aug. 22 in London with Bloomberg's Baden Campbell. (Source: Bloomberg)
Aug. 27 (Bloomberg) -- Richard Yetsenga, head of global markets research at Australia & New Zealand Banking Group Ltd., talks about the economic outlook for Asia and its currencies. He speaks from Singapore with Zeb Eckert on Bloomberg Television's "First Up." (Source: Bloomberg)
“There’s a lot of risk factors that the market is currently having to deal with,” said Sonja Marten, a currency strategist at DZ Bank AG in Frankfurt. “There’s a certain amount of demand for safe havens and that’s what’s giving the yen a bit of support.”
The yen rose 1.4 percent to 129.93 per euro at 8:39 a.m. inNew York, the biggest gain since July 3. Japan’s currency appreciated 1.1 percent to 97.45 per dollar after advancing 0.2 percent yesterday. The dollar climbed 0.3 percent to $1.3332 versus the euro.
The franc strengthened 0.4 percent to 1.2287 per euro, and rose 0.1 percent to 92.17 centimes per dollar.
In the strongest terms yet from a U.S. official, Secretary of State John Kerry yesterday denounced an attack last week on a Damascus suburb as a “cowardly crime” requiring a response against Syrian President Bashar al-Assad’s regime.

‘Pre-Dawn Attack’

President Barack Obama hasn’t yet decided whether to use force in response to the pre-dawn attack in Ghouta, White House press secretary Jay Carney told reporters yesterday. The administration has determined that some action against Assad is necessary, he said.
India’s rupee slumped 2.9 percent to 66.190 per dollar, surpassing the previous low set on Aug. 22. Turkey’s lira fell as much as 2 percent to 2.0368, a record low according to Bloomberg data starting in 1981. Indonesia’s rupiah tumbled 0.7 percent to 10,925 per dollar after reaching 10,926, the least since April 2009.
“The rupee is likely to continue to be under pressure,” Dariusz Kowalczyk, a senior economist at Credit Agricole CIB in Hong Kong, wrote in an e-mail interview. “Any major dip in the dollar-rupee exchange rate should be seen as a buying opportunity for the pair given lack of sufficient measures that would turn around India’s weak fundamentals.”

Stocks Decline

The MSCI Asia Pacific Index of shares slid 0.6 percent and the Stoxx Europe 600 Index fell 1.2 percent.
The yen has strengthened 3.5 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The euro also rose 3.5 percent, while the dollar was little changed.
Australia’s dollar slid versus all except three of its 16 most-active counterparts as a measure of volatility increased, damping demand for higher-yielding currencies.
The JPMorgan G7 Volatility Index increased 26 basis points, or 0.26 percentage point, to 10.14 percent, the highest level since July 17. The gauge has averaged 8.93 percent in the past 12 months.
“Volatility does pick up in and around large turning points in U.S. monetary policy, and we are on the cusp of one at the moment,” said Peter Dragicevich, a currency economist in Sydney atCommonwealth Bank of Australia. (CBA) “Increased volatility historically has placed some downward pressure on the Aussie.”
The Aussie dropped 0.9 percent to 89.53 U.S. cents and New Zealand’s dollar declined 1 percent to 77.76 U.S. cents.

Dollar Index

The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major peers, rose 0.2 percent to 1,029.73 after climbing to 1,031.37 on Aug. 22, the highest since Aug. 2.
The Fed currently buys $85 billion of debt a month to bolster growth. The U.S. central bank will reduce its purchases to $75 billion at its next meeting on Sept. 17-18, according to 65 percent of economists in an Aug. 9-13 Bloomberg survey.
“The dollar is likely to rise through year-end,” said Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York. “Prospects remain intact that the Fed will start tapering in September as economic growth gradually picks up.”
The euro declined for a second day versus the yen and dollar even as a German report showed business confidence improved this month.
The Ifo business climate index climbed to 107.5 from 106.2 in July, the institute said today. That’s the highest since April 2012. Economists predicted an increase to 107, according to a Bloomberg News survey.
To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net