By Ye Xie and Andrew Macaskill
Nov. 26 (Bloomberg) -- The yen rose against the euro as drops in consumer spending and durable-goods orders prompted speculation investors will sell higher-yielding assets and pay back low-cost loans in Japan’s currency.
The dollar gained versus the euro for the first time in four days as evidence the U.S. recession is deepening led investors to take refuge in government debt. The yen had its biggest gain against the South African rand and Brazilian real among major currencies on bets carry trades will unwind.
“The yen is the barometer for risk,” said Shaun Osborne, chief currency strategist in Toronto at TD Securities Inc., a unit of Canada’s second-largest bank. “There’s little confidence in the market. It doesn’t look like the economy will pick up any time soon.”
The yen strengthened 1.1 percent to 123.04 per euro at 8:39 a.m. in New York, from 124.43 yesterday. The U.S. dollar fell 0.1 percent to 95.10 yen from 95.22. The euro fell 1 percent to $1.2933 from $1.3064. The pound declined 1.4 percent to $1.5251.
The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, rose to 85.583 from 85 yesterday. The index climbed to 88.463 on Nov. 21, the highest level since April 2006.
South Africa’s rand tumbled 1.3 percent to 9.5594 yen while the Brazilian real slumped 1.3 percent to 40.5582 on bets investors will unwind trades in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan’s target lending rate of 0.3 percent compares with 12 percent in South Africa and 13.75 percent in Brazil.
Bank of America
Bank of America Corp. raised its forecast for the yen against the dollar on expectations the Bank of Japan will delay cutting interest rates and Japanese investors will refrain from funneling funds into overseas assets offering higher returns.
The yen will only weaken to 97 per dollar at year-end and 100 at the end of March, compared with previous forecasts of 101 and 105, respectively, the bank said.
Japan’s currency remained higher after China’s central bank slashed its key interest rate by the most in 11 years to 5.58 percent to prevent an economic slump.
European Central Bank President Jean-Claude Trichet said in an interview with an Egyptian newspaper posted on the bank’s Web site that there may be “negative figures” for economic growth in the euro area next year.
Thailand’s baht slid as low as 35.35 per dollar, the weakest level since February 2007, as anti-government protesters stormed the main terminal at Bangkok’s international airport.
U.S. Spending
U.S. consumer spending, the biggest contributor to the U.S. economy, fell 1 percent last month, after declining 0.3 percent in September, the Commerce Department said today. Orders for long-lasting goods declined 6.2 percent, following a 0.2 percent decline in September.
Gross domestic product in the U.S. shrank at a 0.5 percent annual rate from July through September, the most since the 2001 recession, according to revised figures released by the Commerce Department yesterday.
The global recession may spur investor demand for the relative safety of Treasuries, helping to underpin the dollar, said UBS AG, the world’s second-largest foreign-exchange trader.
The yield on the benchmark 10-year U.S. note fell eight basis points to 3.03 percent today, approaching the record 2.99 percent reached less than a week ago.
“If the U.S. figures intensify recessionary fears, then we will see the dollar strengthening against the euro paradoxically,” said Antje Praefcke, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-biggest lender. “Fundamentals are not driving the market at the moment, so higher risk aversion is positive for the dollar.”
Government Debt
U.S. government securities returned 4.7 percent in November, heading for their biggest monthly gain since 1985, according to Merrill Lynch & Co.’s U.S. Treasury Master index.
The euro snapped a three-day winning stretch versus the dollar after a technical chart some traders use to predict price movements signaled its 3.8 percent gain in the past five days was excessive.
“The euro has run out of steam; there is nothing else to propel it forward,” said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp., a custodian of $23 trillion of financial assets. “The dollar is still well- underpinned by risk aversion.”
The euro’s 14-day stochastic oscillator versus the dollar was about 85. A level above 80 suggests a reversal may occur.
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Andrew Macaskill in London at amacaskill@bloomberg.net
Posts
No comments:
Post a Comment