BLBG : Yen Falls as China, Korea Economic Reports Spark Yield Demand
The yen weakened against the dollar and euro after economic reports from China and South Korea sparked demand for higher-yielding assets in emerging economies.
The yen weakened against 14 of its 16 major counterparts before a German report that may show retail sales grew for a second month and after Japan’s former top currency official said there are few reasons for the yen to rise. The greenback touched year lows against the won and Australian dollar as manufacturing grew for a fourth month in China and South Korea posted the smallest decline in exports since shipments began sliding in November 2008.
“Solid data are brightening the economic outlook, improving risk appetite,” said Tetsuya Inoue, chief researcher for financial markets and technology studies at Nomura Research Institute. “As emerging-market currencies benefit, the yen is being sold somewhat.”
The yen fell to 131.51 against the euro as of 1:30 p.m. in Tokyo from 131.33 in New York yesterday. It was at 89.91 to the dollar from 89.70. The dollar traded at $1.4626 per euro from $1.4640 in New York yesterday.
The U.S. currency was at 88.12 cents per Australian dollar from 88.28 cents. It earlier touched 88.59, the lowest since August 2008. The won was at 1,180.55 per dollar from 1,178.10. It earlier reached 1,166.50, the strongest level since September 2008.
The yen fell as a report today showed China’s Purchasing Managers’ Index gained to 54.3 in September from 54.0 in August. Economists in a Bloomberg News survey estimated the reading from the Federation of Logistics and Purchasing in Beijing would be 55.0. Markets in Hong Kong and China are closed for holidays.
“The China PMI increase means that the global economy is set for a steady expansion,” said Tomoko Fujii, senior currency strategist at Bank of America Securities-Merrill Lynch in Tokyo.
Korean Won
South Korea’s currency earlier advanced against the dollar after the government said overseas sales fell 6.6 percent from a year earlier in September, less than August’s 20.9 percent slide and the 10.5 percent decline forecast by economists in a Bloomberg survey. Confidence among local manufacturers is at a two-year high, according to a monthly survey published yesterday by the Bank of Korea.
German retail sales, adjusted for inflation and seasonal swings, rose 0.2 percent in August from July, when they climbed 0.7 percent, according to a Bloomberg News survey of economists. The Federal Statistics Office releases the data in Wiesbaden today. A German report yesterday showed the jobless rate declined to 8.2 percent in September from 8.3 percent in August.
Euro-Zone Recovery
“Sentiment is that the euro-zone economy is recovering,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. “The euro is likely to remain firm.”
European Central Bank Governing Council Member Athanasios Orphanides said yesterday it is not yet the appropriate time for the bank to begin reversing its expansionary policy.
While there are “increasing signs of stabilization,” the outlook “remains uncertain,” Orphanides said at a panel discussion in Washington.
The yen also dropped as Makoto Utsumi, a former top currency official at Japan’s Finance Ministry, said the yen may weaken to around 100 against the dollar.
“There aren’t really any particular reasons for the yen to strengthen,” Utsumi, 75, who led Japan’s currency policy from 1989 to 1991 as vice finance minister for international affairs, said in an interview in Tokyo Sept. 29. “I don’t expect the currency to extend its recent gains.”
Fujii Comments
The yen rose to an eight-month high this week after Finance Minister Hirohisa Fujii said he opposes currency intervention in principle, spurring speculation the government won’t step into the foreign-exchange markets. The yen will probably trade between 90 and 95 and may approach 100 in a few months, Utsumi said.
The dollar reversed losses against the euro as the Bank of Japan’s Tankan survey showed companies plan to cut capital spending, prompting a drop in equities. Japan’s Nikkei 225 Stock Average sank 1.6 percent, while MSCI’s Asian Pacific Index of shares declined 1.1 percent.
Large businesses aim to cut spending 10.8 percent this year, more than the 9.4 percent planned three months ago, the central bank said in Tokyo today. Confidence at big manufacturers rose for a second quarter after plunging to a record low in March.
“It’s an unusual situation for large companies to plan cuts in capital spending,” said Masaaki Kanno, chief economist at JPMorgan Chase & Co. in Tokyo. “They can’t be confident about the medium- to long-term outlook due to the big gap in supply versus demand.”
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
