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Monday, 9 December 2013
Yen Weakens as Investors Seek Riskier Assets; Krone Advances
By Joseph Ciolli and Lucy MeakinDec 9, 2013 5:56 AM PT
The yen weakened versus the majority of its major peers as investors sought higher-yielding assets amid an advance in global stocks.
Japan’s currency reached a five-year high versus the euro before three Federal Reserve officials speak today as speculation grows that the U.S. central bank may begin to trim its monthly bond-buying as soon as next week. Norway’s krone rose after touching an almost four-year low against the euro and Australia’s dollar dropped.
“Given that we’re in a situation where risk is positive, which helps equities, dollar-yen is going to go higher,” Dan Dorrow, the head of research at Faros Trading in Stamford, Connecticut, said in a phone interview. “Risk is rallying.”
The yen declined 0.1 percent to 103.05 per dollar at 8:52 a.m. New York time. It touched 103.38 on Dec. 3, the weakest since May 23. The Japanese currency slid 0.3 percent to 141.41 per euro after touching 141.55, the least since October 2008. The 17-member euro rose 0.1 percent to $1.3722.
Futures on the Standard & Poor’s 500 Index of stocks rose 0.2 percent. The MSCI World Index increased 0.1 percent, following a 0.9 percent jump at the end of last week, while the Stoxx Europe 600 Index was little changed after advancing 0.7 percent on Dec. 6.
Futures traders increased bets the yen will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- so-called net shorts -- was 133,383 on Dec. 3, the most since July 2007, and compared with bearish bets of 123,202 a week earlier.
Australia’s dollar halted a two-day gain versus its U.S. counterpart on prospects the local economy will lag behind an improvement in U.S. growth, damping demand for the South Pacific nation’s assets. The Aussie fell 0.2 percent to 90.83 U.S. cents.
Norway’s krone strengthened amid bets recent declines were overdone and as oil prices rose. West Texas Intermediate traded near the highest in almost six weeks, with WTI for January delivery at $97.71 a barrel in electronic trading on the New York Mercantile Exchange.
“Oil has been soft in recent months and therefore it takes some of the steam out of the Norwegian krone,” said Jane Foley, a senior currency strategist at Rabobank International in London. “We will see a pick-up in the Norwegian krone.”
Underlying consumer prices in Norway rose 2 percent in November from a year earlier, according to the median estimate of economists surveyed by Bloomberg News before the data tomorrow.
The Norwegian krone rose 0.2 percent to 8.4281 per euro after depreciating to 8.4513, the weakest since December 2009. It advanced 0.4 percent to 6.1417 per dollar.
The krone has fallen 7.1 percent in the past six months, the biggest drop among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 4 percent and the dollar lost 0.2 percent.
St. Louis Fed President James Bullard said on Nov. 20 a strong jobs report could increase the chances of slowing the pace of bond purchases this month. Dallas Fed President Richard Fisher, who will vote on policy next year, said on Dec. 5 the Fed at the start of tapering purchases should provide “a definite path as to when we reach zero.” Richmond Fed President Jeffrey Lacker is also scheduled to speak.
“You’re in this sweet spot for dollar-yen where the markets are beginning to believe tapering is coming but risk appetite is not being disrupted,” said Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “In a climate of risk appetite being strong into year-end and equities moving higher, that’s certainly supportive for the euro. The obvious trade is euro-yen.”
The Federal Open Market Committee will probably begin reducing $85 billion in monthly bond buying at the Dec. 17-18 meeting, according to 34 percent of economists surveyed on Dec. 6 by Bloomberg, an increase from 17 percent in a Nov. 8 poll.
“If Fed hawks Lacker and Fisher say something supportive of a December taper, it’ll trigger dollar buying, and we could test the May high in dollar-yen,” said Toshiya Yamauchi, a senior analyst in Tokyoat Ueda Harlow Ltd., which provides margin-trading services, referring to the greenback’s five-year high of 103.74.
U.S. data last week showed the jobless rate dropped to a five-year low of 7 percent in November as employers added more workers than forecast.
“The global mood is really quite positive, given we have genuinely better signs on the U.S. economy and the prospect of a reduction in Fed QE is not enough to upset equities,” Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney, said of the U.S central bank’s quantitative easing program. “Yen weakness has been given another shot in the arm.”