By Bloomberg News - Oct 31, 2011 2:04 PM GMT+0700
Oct. 31 (Bloomberg) -- Naomi Fink, head of Japan strategy at Jefferies Japan Ltd., discusses Japan's intervention in markets to weaken its currency and the impact of the yen's appreciation on Japanese corporations and trade. Fink speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Oct. 31 (Bloomberg) -- Nick Maroutsos, who oversees about $3 billion at Kapstream Capital, discusses the outlook for global markets after euro-area leaders last week persuaded bondholders to write down 50 percent of Greek debt holdings. Maroutsos speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
The yen dropped from a post-World War II record against the dollar after Japan intervened in currency markets. Asian stocks sank as companies reported lower- than-estimated earnings and commodities declined.
The yen sank 4.2 percent to 79.01 per dollar at 4:03 p.m. in Tokyo after climbing to a record 75.35 earlier today. The Australian dollar dropped 1.4 percent. The dollar-denominated MSCI Asia Pacific Index fell 3 percent. Standard & Poor’s 500 Index futures slipped 0.8 percent and Euro Stoxx 50 contracts lost 1 percent. Copper slid as much as 3.7 percent in London, gold dropped 1.6 percent, and oil dipped 0.8 percent in New York.
Japanese Finance Minister Jun Azumi said today the government took unilateral steps to weaken the yen, which strengthened even as stocks rallied globally this month on optimism that Europe will contain its debt crisis. Group of 20 leaders will gather Nov. 3-4 in Cannes, France, while central bankers from Australia, the U.S. and Europe will hold interest- rate policy meetings this week.
“You wouldn’t want to be buying yen here,” said Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB. “At least for the next few weeks, the Japanese might have just created better levels to be buying yen or for exporters to effectively do the same.”
The yen weakened 3.4 percent to 110.88 per euro after Azumi said he will act against speculation and plans to continue intervention until he is “satisfied.” The currency climbed last week even as the Bank of Japan unveiled measures that Governor Masaaki Shirakawa said were intended to respond to the appreciation and fallout from the European debt crisis.
Protecting Exports
The weaker yen bolstered shares of Japanese exporters. Canon Inc., a camera maker that gets more than 80 percent of its revenue outside Japan, rose 1 percent. Nintendo Co., the maker of the Wii game console, rallied 1.5 percent.
Thailand’s baht dropped 0.6 percent to 30.72 per dollar, trimming its monthly gain to 1.2 percent. Indonesia’s rupiah fell 0.7 percent to 8,853, taking losses in October to 0.5 percent. Taiwan’s dollar fell 0.1 percent to NT$29.909.
“After the spike in the yen, traders worry that other Asian central banks will follow their Japanese counterpart to protect their exports,” said Henry Lin, a Taipei-based foreign- exchange trader at Taiwan Shin Kong Commercial Bank.
The Australian dollar slipped 1.4 percent to $1.0556. The central bank is forecast to cut interest rates by a quarter- percentage point to 4.5 percent, according to economists surveyed by Bloomberg before tomorrow’s policy meeting.
ECB, FOMC
European Central Bank officials will meet to decide on rates on Nov. 3, with data today forecast to show inflation eased in October. The Federal Open Market Committee is scheduled to meet on Nov. 2. The euro fell 1 percent to $1.4008. The Dollar Index, which tracks the U.S. currency against those of six trading partners, jumped 1.5 percent.
Today’s losses pared the MSCI Asia Pacific Index’s October gain to 7 percent. The regional index was headed for its largest monthly advance since December 2010. Australia’s S&P/ASX 200 Index decreased 1.3 percent, South Korea’s Kospi Index slid 1.1 percent and Hong Kong’s Hang Seng Index retreated 1.2 percent.
Among the 324 companies on the MSCI regional index that have released earnings since Oct. 11, 175 have missed analysts’ profit estimates, compared with 104 that have beaten forecasts, according to data compiled by Bloomberg. China Railway Group Ltd. sank 13 percent in Hong Kong after the company said net income dropped 49 percent last quarter. Tohoku Electric Power Co. slumped 6.4 percent after the Japanese utility reported a wider- than-expected first-half loss.
‘Sobering’
Futures on the S&P 500 indicate the U.S. stocks gauge may pare its 14 percent rally this month. The S&P 500 jumped 3.8 percent last week after European leaders agreed to boost its rescue fund and investors agreed to a voluntary writedown of 50 percent of Greek debt.
“As a result of the European Union announcement, risk assets performed exceptionally well” last week, Nick Maroutsos, who oversees the equivalent of about $3 billion at Sydney-based Kapstream Capital, said in a Bloomberg Television interview. “As with any big party, the day after can be a bit sobering. We’re certainly not ready to sound the all clear yet.”
U.S. data this week may show nonfarm payrolls increased 95,000 in October, less than the 103,000 jobs added the previous month, according to the median forecast of economists surveyed by Bloomberg. Treasury 10-year yields declined three basis points to 2.29 percent.
Bond Risk
The cost of protecting Asia-Pacific bonds from default rose, with the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increasing six basis points to 171 basis points, according to Royal Bank of Scotland Group Plc. The index is headed for its biggest daily advance since Oct. 20, according to data provider CMA, after falling 35.4 basis points last week.
Copper in London dropped 2.8 percent to $7,950 a metric ton, leading a decline among industrial metals, after Chinese Premier Wen Jiabao said the government will maintain property curbs. Copper is still set for a 13 percent advance this month, the most since December 2010. Zinc retreated 2.2 percent to $1,942 a ton and lead dropped 3.6 percent to $2,014.75 a ton.
Gold for immediate-delivery declined 1.6 percent to $1,715.35 an ounce, paring its monthly rally to 5.6 percent. December-delivery oil lost 0.8 percent to $92.61 a barrel, trimming its October gains to 17 percent.
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
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