BLBG: Yen Falls After Philips Earnings Jump Increases Risk Appetite
Oct. 12 (Bloomberg) -- The yen fell against the euro and the dollar after Royal Philips Electronics NV, Europe’s biggest consumer-electronics maker, unexpectedly posted a profit in the third quarter, fanning appetite for higher-yielding assets.
The yen dropped most against the Canadian dollar and the Mexican peso after Philips said third-quarter net income was 174 million euros ($256 million), fueling gains in European stocks. Analysts in a Bloomberg survey predicted a loss of 44.7 million euros for the Amsterdam-based company. The pound fell to a six- month low against the euro after the Center for Economics and Business Research said interest rates won’t rise until 2011.
“There’s a bit of a correction going on in the yen as people unwind some of the more speculative positions in the currency,” said Ian Stannard, a currency strategist at BNP Paribas SA in London. “Earnings reports are contributing to the more positive picture in FX markets.”
The yen depreciated to 90.13 per dollar as of 7:21 a.m. in New York, from 89.78 yen last week. It weakened to 133.01 per euro, from 132.25. The dollar fell to $1.4757 per euro from $1.4732. The yen fell 1.2 percent to 87.20 per Canadian dollar. The Dow Jones Stoxx 600 Index of European shares rose 1.1 percent.
“Japanese investors are still looking to put some funds abroad,” said Norifumi Yoshida, vice president of the trading section at Mizuho Corporate Bank Ltd. in Singapore. “This is likely to be negative for the yen.” Foreign-exchange movements may be exaggerated as national holidays in the U.S., Canada and Japan reduce trading volumes, Yoshida said.
Benchmark interest rates are 0.1 percent in Japan and as low as zero in the U.S., compared with 3.25 percent in Australia and 1 percent in the countries using the euro.
Pound Falls
The pound declined 0.6 percent against the euro to trade at 93.49 pence, the lowest level since March 27. Against the dollar, sterling slid 0.3 percent to $1.5795, having traded at $1.5729 earlier, the weakest level since May 21.
The Bank of England will keep its key rate below 2 percent until 2014, the London-based CEBR said yesterday. The center forecasts the bank will also employ a further 75 billion pounds ($120 billion) in quantitative easing.
“We are likely to see an exciting policy mix, with the fiscal policy lever pulled right back while the monetary lever is fast forward,” Douglas McWilliams, chief executive officer of CEBR, said in an e-mailed statement.
Net Longs
The dollar fell against the euro as a Commodity Futures Trading Commission report showed futures traders increased their bets to the most in more than 1 1/2 years that the euro will gain versus the greenback. The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so-called net longs -- was 51,045 on Oct. 6, the most since January 2008, compared with net longs of 39,766 a week earlier.
The dollar earlier rose as traders judged the U.S. currency’s drop to a two-week low on Oct. 8 was overdone amid speculation the Federal Reserve will withdraw stimulus measures.
The Fed Bank of St. Louis President James Bullard said yesterday that inflation may become a bigger problem than anticipated. Fed Chairman Ben S. Bernanke said last week the central bank may raise interest rates when the economic outlook improves.
“If part or most of the fall in output was a collapsed bubble, then today’s output gap would be smaller than it appears,” Bullard said in a speech in St. Louis, indicating inflation risks may be greater than estimated. The output gap is the difference between the long-term growth potential in the economy and actual growth.
‘Hawkish Touch’
“Together with Bernanke’s comments they clearly gave a hawkish touch to the overall picture but it doesn’t change the negative view on the dollar,” said Michael Klawitter, a foreign- exchange strategist in Frankfurt at Commerzbank AG, Germany’s second-biggest lender.
Policy makers boosted foreign-currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.
To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
