SF: Yen, Dollar Strengthen as Asian Stocks Decline; Pound Weakens
Jan. 28 (Bloomberg) -- The yen and dollar strengthened against most of their major counterparts as a decline in Asian stocks boosted demand for safer assets.
The yen also advanced on speculation Japanese exporters bought it before the end of the month, taking advantage of declines in the currency following the nation's credit-rating cut. The dollar rose from near a two-month low versus the euro before a U.S. report today forecast to show economic growth accelerated last quarter. The pound declined after U.K. data showed consumer confidence slid the most in almost two decades.
"Exporters usually purchase the yen at the end of the month," said Yuji Saito, director of the foreign-exchange department in Tokyo at Credit Agricole Corporate and Investment Bank, a unit of France's second-largest lender by total assets. "Equities may undergo a downward correction. The bias is for the yen to be bought."
Japan's currency climbed to 113.34 per euro as of 3:22 p.m. in Tokyo from 113.89 in New York yesterday, when it slid 1.1 percent. The yen rose to 82.64 per dollar from 82.92, paring this week's decline to 0.1 percent. The dollar gained to $1.3714 per euro from $1.3734, after falling to $1.3758 on Jan. 27, the weakest since Nov. 22.
The MSCI Asia Pacific Index of shares lost 0.6 percent, snapping a four-day gain. Japan's currency rallied from near a two-week low against the dollar on speculation its decline was overdone yesterday when Standard & Poor's lowered the nation's credit rating to AA-, citing concern over the government's ability to tackle its debt burden.
No 'Major Issue'
"The downgrade isn't a major issue for the yen," said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation's largest lender. "Virtually all Japanese government bonds are held in Japan so foreigners don't hold much. If they did, there would be more implications for the currency."
The dollar pared its weekly decline against the euro to 0.7 percent before a report that economists said will show U.S. gross domestic product expanded for a sixth quarter.
The U.S. economy grew at a 3.5 percent annual pace in the three months ended Dec. 31, up from a 2.6 percent rate in the previous quarter, according to a Bloomberg survey before the Commerce Department data. Consumer spending, which accounts for about 70 percent of the economy, increased at a 4 percent annual pace, the most since the last three months of 2006, a separate survey showed.
"The data out of the U.S. is starting to look pretty good," said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. "The U.S. dollar may strengthen."
U.K. Confidence
The dollar will reverse losses "mainly" against the euro if the U.S. economic expansion meets Morgan Stanley's forecast for 4.4 percent growth, Calvin Tse, a London-based currency strategist at the bank wrote in a research note yesterday.
The dollar slid 2.4 percent against the euro in January, 4 percent against Sweden's krona and 1.8 percent versus the pound.
The pound snapped a two-day gain versus the yen after GfK NOP Ltd. said its index of sentiment fell 8 points from December to minus 29, the lowest since March 2009. The decline in confidence was the biggest since 1992, the research group said.
The U.K.'s currency weakened 0.2 percent to $1.5899, and dropped 0.5 percent to 131.41 yen.
The Australian dollar fell for the first time in three days against the yen on speculation the central bank will slow the pace of interest-rate increases to help the nation recover from months of flooding. Prime Minister Julia Gillard announced yesterday a one-off levy to help pay for reconstruction.
"The Australian economy is more likely to deteriorate than to grow as before," said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd. "Given slowing economic growth, the Aussie will be less favored."
Australia's currency declined 0.4 percent to 81.90 yen and fell 0.3 percent to NZ$1.2822.
