BLBG: Yen Advances as Japan’s Machine Orders Rise More Than Forecast
By Yoshiaki Nohara and Ron Harui
Nov. 11 (Bloomberg) -- The yen strengthened for a second day against the dollar and euro after Japanese machine orders rose more than forecast, adding to evidence the economic recovery is gathering momentum.
The dollar traded near a 15-month low against six major U.S. counterparts as growing industrial production and retail sales in China supported demand for higher-yielding assets. U.S. Treasury Secretary Timothy Geithner said a strong dollar is “very important” to the nation’s interest. The New Zealand dollar fell after central bank Governor Alan Bollard said the “significant” increase in the currency is unlikely to be sustainable.
“The yen is benefiting as the market reacted to the positive machine orders data,” said Koji Fukaya, a senior currency strategist in Tokyo at Deutsche Bank AG. “The data were a surprise. Improving risk appetite may weigh down on the dollar.”
The yen rose to 89.37 per dollar as of 1:22 p.m. in Tokyo from 89.81 in New York yesterday. The yen earlier touched 89.32, the highest since Nov. 2. It gained to 133.90 per euro from 134.65.
The dollar was at $1.4982 per euro from $1.4993. It fell to C$1.0477, the lowest level since Oct. 23, before trading at C$1.0493 from C$1.0495 yesterday.
Japan’s Economic Data
Japan’s currency gained versus all 16 major counterparts after machine orders, an indicator of business investment in three to six months, climbed 10.5 percent in September after gaining 0.5 percent in August, Japan’s Cabinet Office said today in Tokyo. The median estimate of 25 economists surveyed by Bloomberg was for a 4.1 percent gain.
Figures due Nov. 16 may show Japan’s economy grew at a 2.9 percent annualized pace last quarter, according to the median estimate of economists surveyed by Bloomberg. It would be the second-consecutive expansion since the economy emerged from its worst postwar recession and the first since Prime Minister Yukio Hatoyama’s government took power in September.
China’s factory output rose 16.1 percent in October from a year earlier after gaining 13.9 percent in September, the statistics bureau reported today in Beijing. Economists in a Bloomberg News survey estimated a gain of 15.5 percent.
“It paints an upbeat picture of Chinese growth momentum in to the fourth quarter,” said Adrian Foster, Asia head of financial markets research at Rabobank Groep NV in Hong Kong. “On a tactical sense, it’s dollar bearish.”
A separate Chinese report showed retail sales advanced 16.2 percent in October from a year earlier, following a 15.5 gain in September. Economists predicted a 15.7 percent advance.
China’s Economic Data
Losses in the dollar were limited after new loans in China dropped more than expected and on prospects investors cut bets the currency will fall before the Veterans Days’ holiday in the U.S.
“The Chinese data included weak numbers, limiting risk taking somewhat,” said Hitoshi Asaoka, senior strategist at Mizuho Trust & Banking Co., Ltd. in Tokyo. “Investors are also hesitant to take new positions before the public holiday.”
New loans in China declined to 253.0 billion yuan ($37 billion) last month from 516.7 billion yuan in September, the Beijing-based People’s Bank of China reported today. That was less than 370.0 billion yuan predicated by economists in a Bloomberg News survey.
The Dollar Index, which ICE uses to track the greenback against the currencies of six major U.S. trading partners, fell to 74.986 from 75.021 in New York yesterday. The gauge earlier touched 74.889, the lowest level since August 2008.
‘Strong Dollar’
Treasury Secretary Geithner said a strong dollar is in the nation’s interest and the government recognizes the importance it plays in the global financial system.
“I believe deeply that it’s very important to the United States, to the economic health of the United States, that we maintain a strong dollar,” Geithner told reporters in Tokyo today.
World Bank President Robert Zoellick said at a conference in Singapore today the U.S. dollar’s role as the global reserve currency is secure for some time. Asian Development Bank President Haruhiko Kuroda also said in a Bloomberg Television interview that the dollar will continue to be the world’s reserve currency.
New Zealand’s dollar weakened after Bollard said before a parliamentary committee the currency’s strength was disappointing and driven by gains in dairy prices.
“The rise in the New Zealand dollar over recent months could hinder continued improvement in the external balance,” Bollard said in a semi-annual report on the nation’s financial system. The currency’s current level “is unlikely to be sustainable,” he said.
The New Zealand dollar dropped to 74.12 U.S. cents from 74.35 cents. It earlier fell to as low as 74.04 cents. The so- called kiwi dropped 0.8 percent to 66.24 yen.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
