Yen Climbs to Seven-Week High as Stocks Spur Safety Demand

By Anna Rascouet and Ye Xie

Sept. 2 (Bloomberg) -- The yen advanced to a seven-week high against the euro and dollar as European stocks declined on speculation a six-month rally outpaced the prospects for earnings growth, spurring demand for safety

Japan’s currency rose versus counterparts including the Norwegian krone as the Dow Jones Stoxx 600 Index of shares slid 0.8 percent. Australia’s currency climbed versus all of its major counterparts after a report showed the nation’s economic growth unexpectedly accelerated in the second quarter.

“The equity markets turned over quite quickly, and that led to a risk-version trade and a yen trade,” said Paul Robson, a senior currency strategist at Royal Bank of Scotland Group Plc in London. “We had some stops taken out on dollar-yen.”

The yen appreciated 0.6 percent to 131.40 per euro at 8:22 a.m. in New York, from 132.19 yesterday, after earlier reaching 131.28, the strongest level since July 15. Japan’s currency climbed 0.5 percent to 92.46 per dollar, from 92.92, after reaching 92.38, the strongest level since July 13.

Japan’s currency extended its gain versus the euro as a report from ADP Employer Services showed companies eliminated 298,000 workers from payrolls in August, more than forecast. The median estimate of 32 economists surveyed by Bloomberg News was for a reduction of 250,000.

The euro was little changed against the dollar after the European Union’s statistics office affirmed that the economy of the 16 nations that use the currency contracted 0.1 percent in the second quarter after a record 2.5 percent drop in the previous period.

Drop in Euro

Europe’s currency traded at $1.4207, compared with $1.4224 yesterday. Against the pound, it declined 0.5 percent to 87.58 pence, from 88.03 pence.

The yen rose 0.9 percent to 13.48 South Korean won and 0.3 percent to 15.19 versus the krone as the drop in stocks encouraged investors to reduce holdings of higher-yielding assets. The yen tends to gain in times of financial turmoil as Japan’s trade surplus reduces reliance on foreign capital.

The VIX Index, a measure of stock-market volatility known as Wall Street’s fear gauge, climbed to 29.23 yesterday, the highest level since July 13, from 26.01 on Aug. 31.

The Australian dollar climbed against all of the 16 most- traded currencies tracked by Bloomberg after the Bureau of Statistics said in Sydney today that the nation’s gross domestic product expanded 0.6 percent in the second quarter from the previous three months. The median forecast of 20 economists surveyed by Bloomberg News was for a 0.2 percent expansion.

“The GDP number was a big surprise compared to market forecasts,” said Greg Gibbs, a foreign-exchange strategist at RBS in Sydney. “Markets are rushing to front-load those rate hikes again, and consequently the currency has bounced.”

Higher Aussie

The Aussie, as the currency is known, climbed 0.8 percent to 83.25 U.S. cents after earlier falling to 82.41 cents, the lowest level since Aug. 27. The Australian dollar rose 0.5 percent to 77.16 yen.

Goldman Sachs Group Inc. raised its forecast for the Aussie, expecting it to rise to 87 cents in three and six months. The previous forecast was 82 cents for both periods. The New York- based firm predicted the Australian central bank will increase its benchmark interest rate by a half-percentage point in November, from 3 percent.

The firm also raised its forecast for the New Zealand’s dollar to 71 U.S. cents in three months and 67 cents in six months, from 60 cents and 58 cents. The New Zealand’s dollar traded at 67.46 cents today.

To contact the reporters on this story: Anna Rascouet in London at arascouet@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net