Yen Rises to Six-Week High Versus Euro on Growth Concern

The yen rose to the strongest level in almost six weeks against the euro as signs global growth is slowing underpinned demand for the relative safety of the Japanese currency.
The dollar appreciated versus all except one of its 16 major counterparts after South Korea unexpectedly cut interest rates and European and Asian stocks declined. Australia’s dollar dropped the most in three weeks after a government report showed employers cut payrolls in June. The yen briefly erased gains after the Bank of Japan (8301) bolstered its asset-purchase fund.

Enlarge image

Pedestrians walk past the Bank of Japan headquarters in Tokyo, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

July 11 (Bloomberg) -- Daragh Maher, a currency strategist at HSBC Holdings Plc, and Greg Peters, chief cross-asset strategist at Morgan Stanley, talk about their investment strategies for currencies, and the outlook for the yen and U.S. dollar. They speak with Sara Eisen and Stephanie Ruhle on Bloomberg Television's "Lunch Money." (Source: Bloomberg)

July 2 (Bloomberg) -- Derek Halpenny, European head of global currency-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd., talks about European Central Bank interest rates and the outlook for the euro and dollar. He speaks with Linzie Janis on Bloomberg Television's "On the Move." (Source: Bloomberg)

“We are seeing very significant negative signals being generated by leading indicators, suggesting that the global slowdown is continuing to gain momentum,” said Ian Stannard, chief European currency strategist at Morgan Stanley in London. “All of this is going to keep the yen very well supported.”
The yen climbed 0.7 percent to 96.93 per euro at 10:15 a.m. in London after appreciating to 96.76, the strongest level since June 1. Japan’s currency advanced 0.5 percent to 79.33 per dollar. The dollar gained 0.2 percent to $1.2221 per euro. It earlier climbed to $1.2208, the most since July 2010.
The Bank of Korea unexpectedly cut borrowing costs for the first time in more than three years, lowering the benchmark seven-day repurchase rate by a quarter percentage point to 3 percent. The Stoxx Europe 600 Index of shares fell 0.8 and the MSCI Asia Pacific Index declined 1.6 percent.

China Growth

Figures tomorrow will show China’s gross domestic product growth slowed to an annual 7.7 percent last quarter, from 8.1 percent in the previous three months, a separate Bloomberg survey showed.
“We do have quite a lot of key event risks coming up including Chinese GDP tomorrow, said Khoon Goh, a senior foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd. (ANZ) “If we get a weaker run of data, then concerns over global growth will again come to the fore, and that is typically positive for the yen.”
Japan’s currency gained 6.9 percent in the past three months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 4.6 percent, and the euro dropped 3.9 percent.
The yen briefly erased its daily advance versus the dollar and euro after the BOJ boosted its purchase program and said it will continue powerful monetary easing.

BOJ Purchases

The BOJ expanded its asset-purchase fund by 5 trillion yen to 45 trillion yen and cut the size of a credit loan facility by the same amount to 25 trillion yen. The central bank held its benchmark rates at between zero to 0.1 percent and left the maturity of government debt it buys unchanged at three years.
“The initial jump we saw in dollar-yen after the BOJ announcement was a mistake,” said Masafumi Yamamoto, chief currency strategist in Tokyo at Barclays Plc in Tokyo. “Today’s decision doesn’t have much material impact on currencies because the BOJ didn’t extend the maturity of bond it purchases to four years or longer, or change the total of its stimulus program.”
Australia’s dollar dropped for the fourth time in five days after the jobless rate rose, increasing speculation the central bank will cut interest rates again as Europe’s clouded outlook restrains global growth.
The number of people employed in Australia fell by 27,000, almost erasing a revised 27,800 job gain in May, the statistics bureau said in Sydney. The jobless rate increased for a second month, to 5.2 percent from 5.1 percent.

‘Much Weaker’

“The jobs numbers were much weaker than expected,” said Sue Trinh, a senior currency strategist in Hong Kong at Royal Bank of Canada. “That’s bearish for the Aussie dollar.”
Australia’s currency weakened 1 percent to $1.0147 after falling as much as 1.1 percent, the biggest intraday decline since June 21. The Aussie slid 1.6 percent to 80.50 yen.
The euro may extend declines against the dollar, Bank of Tokyo-Mitsubishi UFJ Ltd. said, citing Fibonacci analysis.
“The 50 percent retracement, at around $1.21, to the euro’s historical low from the high is within reach, given the drop we saw in the currency” yesterday, said Kikuko Takeda, a senior currency economist at Bank of Tokyo-Mitsubishi in London. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching new high or low.
The retracement level is at $1.2134, based on the low of 82.30 U.S. cents in October 2000 and the high of $1.6038 in July 2008, according to data compiled by Bloomberg. The level was last seen in June 2010.

Reymount Investment Products: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software.