Dollar, Yen Climb as Alcoa Earnings Fuel Higher Risk Aversion

By Bo Nielsen

Jan. 12 (Bloomberg) -- The dollar and the yen rose against higher-yielding currencies including the Norwegian krone and South Africa’s rand after stock markets declined and earnings from Alcoa Inc. missed analysts’ estimates.

Japan’s yen advanced against all of the 16 most-traded currencies tracked by Bloomberg as the MSCI World Index snapped two days of gains. Australia’s dollar retreated from near a seven-week high versus the U.S. currency after a report showed home-loan approvals fell more than economists predicted.

“Alcoa rattled some people and the dollar and the yen are still doing good when stock markets fall,” said John Hydeskov, a senior analyst at Danske Bank A/S, Denmark’s biggest bank.

The dollar fell 0.4 percent to 91.77 yen as of 10:05 a.m. in London. It strengthened to $1.4497 per euro, from $1.4513 in New York late yesterday. The yen appreciated 0.5 percent to 132.99 per euro from 133.64.

The dollar rose 0.5 percent to 5.6388 kroner and 0.7 percent to 7.4263 rand. The yen gained 0.7 percent to 16.2981 per krone and 0.9 percent to 12.36 per rand.

Alcoa, the largest U.S. aluminum maker, said fourth-quarter profit excluding certain items was 1 cent a share, trailing analysts’ average estimate for earnings of 6 cents. The MSCI Index fell 0.2 percent, Europe’s Dow Jones Stoxx 600 Index dropped 0.5 percent, while futures on the Standard & Poor’s 500 Stock Index slipped 0.4 percent.

‘Lose Momentum’

“If we lose momentum in stocks it could lead to a correction and that will help the dollar and the yen,” said Antje Praefcke, a currency analyst at Commerzbank AG in Frankfurt. “People are following the stock markets closely.”

Benchmark rates in Norway of 1.75 percent and 7 percent in South Africa encourage investors to buy assets denominated in their currencies. Rates of between zero to 0.25 percent in the U.S. and of 0.1 percent in Japan fuel lending in the dollar and the yen.

The dollar declined versus the yen as the yield advantage on two-year U.S. notes versus comparable Japanese bonds extended two days of declines in the wake of the worse-than-expected payrolls report on Jan. 8.

The extra yield on two-year Treasuries relative to Japanese notes narrowed to 76 basis points today, the least since Dec. 23. as traders scaled back wagers that the Fed will increase its target rate for overnight loans amid signs the economic recovery may be uneven.

Sources of Weakness

U.S. employers cut 85,000 jobs in December after adding 4,000 the previous month, the Labor Department said on Jan. 8.

Gains in Australia’s dollar were tempered after the statistics bureau said the number of loans granted to build or buy houses and apartments dropped 5.6 percent in November from October, when they declined 1.9 percent. The median estimate of economists surveyed by Bloomberg was for a 0.5 percent decline.

“The major source of weakness is the first-home buyers segment because they’re more interest-rate sensitive,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “These are good levels to get in as we see the Aussie going up to 98 cents in about six months.”

Australia’s currency traded at 92.66 U.S. cents from 92.96 cents, after rising to 93.26 cents yesterday, the strongest level since Nov. 18.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net