SF: Yen Near 2-Week Low Versus N.Z. Dollar on Global Growth Outlook
Dec. 31 (Bloomberg) -- The yen declined to a two-week low against New Zealand's dollar as speculation the global economic recovery will pick up next year boosted demand for assets in nations with higher returns.
The yen extended this month's decline versus most higher- yielding currencies after a report showed South Korea's consumer prices rose more than forecast and before data that may reveal manufacturing in the U.S. expanded at the fastest pace in seven months. The euro rose to a two-week high versus the dollar after Chancellor Angela Merkel vowed to defend the common currency as "the foundation" of Germany's economy.
"The U.S. economy will start to show good signs of a recovery," said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. "People will be looking to invest where they do gain some sort of yield. The yen will weaken."
Japan's currency slipped to 63 per New Zealand dollar at 7:04 a.m. in London from 62.81 in New York yesterday. It earlier reached 63.04, the lowest level since Dec. 14. It has fallen 1.3 percent versus the so-called kiwi this month. The yen dropped to 108.68 per euro from 108.33, and fetched 81.33 per U.S. dollar from 81.53. The financial markets in Japan are closed today for a public holiday.
The euro rose to $1.3364 from $1.3291 in New York, after earlier touching $1.3388, the strongest since Dec. 14. The dollar was at 0.9349 francs from 0.9353 francs yesterday. It earlier reached a record low of 0.9338 francs. The U.S. currency was set for a 9.6 percent loss this year versus the franc.
South Korea, U.S.
South Korea's consumer prices rose 3.5 percent in December from a year ago, Statistics Korea said in Gwacheon today. The median estimate was for a 3.2 percent gain in a Bloomberg News survey of nine economists. The Institute for Supply Management's factory index in the U.S. rose to 57.0 in December, the most since May, from 56.6 in November, economists said before the Jan. 3 report. A reading higher than 50 signals growth.
The Federal Reserve on Dec. 14 reaffirmed its plan to buy $600 billion in Treasuries through June, a policy known as quantitative easing, to sustain growth in the world's largest economy. Fed Chairman Ben S. Bernanke is scheduled to speak about monetary and fiscal policy before the U.S. Senate Budget Committee on Jan. 7.
"Bernanke's testimony before the Senate will be a key event," analysts led by Hans-Guenter Redeker, London-based global head of foreign-exchange strategy at BNP Paribas SA, wrote in a research note yesterday. "Any assertion that further QE may be an option will see the dollar weaker."
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, declined 0.4 percent to 79.183 today. The gauge was still poised for a 1.7 percent gain this year.
Germany's Merkel
The euro extended this month's advance to 2.9 percent versus the dollar after Germany's Merkel called for resolve to bolster the single currency.
"Europe is in the midst of a great test," Merkel said in an advance text of a New Year's speech which will be broadcast to the nation later today. "We must strengthen the euro."
Merkel and leaders of other euro-zone nations are trying to forge a so-called permanent crisis mechanism to defend the currency once an emergency fund set up this year expires in 2013. Pledging guarantees worth 123 billion euros ($164 billion), Germany is the biggest contributor to the 440 billion euro fund.
"European politicians seem to be strengthening efforts to bolster the euro," said Yusuke Tanaka, a senior dealer at Mitsubishi UFJ Trust & Banking Corp. in Singapore. "This may be supportive of the currency."
Indonesia's Rupiah
Indonesia's rupiah advanced to a one-month high, poised to complete a second-consecutive annual gain, as the nation's improving economy and higher yields helped attract funds from abroad.
Global funds bought $2.3 billion more of the nation's shares than they sold this year through Dec. 29, helping drive the Jakarta Composite Index 46 percent higher. Foreigners boosted holdings of Indonesian government debt by 80 percent to 194.8 trillion rupiah ($21.7 billion) as of Dec. 23, finance ministry data shows.
"Stable economic growth and foreign investors' need for quality investments helped the rupiah to gain," said Wiwig Santoso, head of treasury and markets at PT Bank DBS Indonesia in Jakarta.
The rupiah rose 0.2 percent to 8,963 per dollar, the strongest since Nov. 26 and set for a 4.9 percent advance this year, according to data compiled by Bloomberg.
--With assistance from Brian Parkin in Berlin and Khalid Qayum in Singapore. Editors: Rocky Swift, Drew Gibson
