Yen Drops to Month Low on Stocks, U.S. Growth Outlook

The yen declined against most of its major peers as Asian stocks rose before U.S. data forecast to show improvement in industrial production and housing starts, reducing demand for refuge assets.
The Japanese currency slid for a fourth day to an almost one-month low against the greenback after Federal Reserve Bank of St. Louis President James Bullard said U.S. growth will pick up next year and push down unemployment. Demand for the euro was supported before European Union leaders meet this week to discuss measures to contain the debt crisis. New Zealand’s dollar slid after data showed annual inflation was the slowest in more than 12 years.

 

The yen weakened 0.2 percent to 78.79 per dollar as of 8:56 a.m. in Tokyo. Japan’s currency slid 0.3 percent to 102.18 per euro from 101.84 yesterday. Photographer: Kiyoshi Ota/Bloomberg

Oct. 10 (Bloomberg) -- Japanese Prime Minister Yoshihiko Noda talks about the yen's strength, its impact on the local economy and the government's readiness to act against any disorderly gains for the currency. Noda speaks with Bloomberg's Matt Winkler and Brian Fowler in Tokyo. (This is an excerpt and a translation of Noda's remarks in Japanese. Source: Bloomberg)

“We’re looking for further improvement in U.S. data,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “The U.S. economy is set to outperform Japan and Europe, and that should see some support for the U.S. dollar and weakness in the yen.”
The yen slipped 0.3 percent to 78.88 per dollar as of 7 a.m. in London, adding to a 0.6 percent decline over the previous three trading days. It touched 78.91, the weakest since Sept. 19. Japan’s currency lost 0.5 percent to 102.32 per euro. The euro added 0.2 percent to $1.2971.
The yen has fallen 5.1 percent this year, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar and the euro both declined 2.3 percent.

Industry, Housing

U.S. industrial production probably increased 0.2 percent in September from the previous month, when it fell 1.2 percent, according to the median estimate of economists surveyed by Bloomberg News before the Fed releases the figures today.
Economists in a separate poll predict that Commerce Department data due Oct. 17 will show new housing construction climbed 20,000 from August to a 770,000 annual rate last month, the most since October 2008. The department reported yesterday that retail sales increased 1.1 percent last month, following a revised 1.2 percent gain in August that was the biggest since October 2010.
The MSCI Asia Pacific Index of stocks climbed 0.8 percent after a 0.8 percent advance in the Standard & Poor’s 500 Index (SPX) of U.S. shares yesterday.

Softbank, Sprint

Demand for the Japan’s currency was also limited after the nation’s third-largest mobile-phone operator Softbank Corp. (9984) agreed to buy a stake of about 70 percent in Kansas-based Sprint Nextel Corp. (S) for $20.1 billion. That deal would be the biggest publicly announced outbound acquisition by a Japanese company since at least 2000, according to data compiled by Bloomberg.
“This move in the yen has more to do with talk of Japanese corporate activity,” Emma Lawson, a Sydney-based currency strategist at National Australia Bank Ltd., said in reference to Softbank’s takeover of Sprint.
The yen is likely to weaken in the longer term, according to Jens Nordvig, Nomura Holdings Inc.’s managing director of currency research. Data are pointing to stronger outflows of funds from the country, he wrote in a note to clients yesterday.
Nomura forecasts the yen will depreciate to 82 per dollar at the end of the year and to 83 in the first quarter of 2013.
The greenback may advance to an eight-week high against the yen should it breach key resistance levels, according to Bank of Tokyo Mitsubishi UFJ Ltd., citing trading patterns.

U.S. Dollar

The dollar may strengthen to its 200-day moving average of 79.39 yen should it rise above the upper end of its daily Bollinger band at 78.86 and the higher end of the Ichimoku cloud at 78.90, said Teppei Ino, an analyst in Tokthe unit of Mitsubishi UFJ Financial Group Inc., Japan’s biggest financial group by market value.
The 17-nation euro rose before EU leaders start a two-day summit in Brussels on Oct. 18 amid speculation Spain will ask for a financial bailout. The country is preparing to make request for a rescue and allow the European Central Bank to begin buying its debt, the Financial Times reported, citing an unidentified Spanish economy ministry official.
“The market wants some signs that perhaps Spain’s been compelled to ask for aid and some confirmation that Greece is set to receive its next tranche,” Bank of New Zealand’s Jones said. “If we see either of those scenarios, we would see a relief rally in the euro.”
Consumer prices in New Zealand rose 0.8 percent in the third quarter from a year earlier, the country’s statistics bureau said in Wellington today. The result was the lowest since the fourth quarter of 1999.
The New Zealand dollar dropped 0.3 percent to 81.64 U.S. cents.

Source: Bloomberg

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