BLBG: Yen Trades Near One-Week High Against Euro as Asian Stocks Fall
By Yoshiaki Nohara and Ron Harui
Jan. 13 (Bloomberg) -- The yen traded near a one-week high against the euro as Asian stocks declined amid concern the global economic recovery will slow, spurring demand for Japan’s currency as a refuge.
The dollar strengthened against most Asian currencies after China yesterday moved to damp lending in an effort to avoid an asset bubble forming. The euro traded near a 10-month low against the Swiss franc before a German report today that is forecast to show Europe’s largest economy contracted at the fastest annual pace in at least 38 years.
“A combination of factors weighed on appetite for risk,” said Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong. “We are seeing the usual relationship between risk and currencies. Weaker equities in general imply firmer yen and dollar.”
The yen traded at 131.92 per euro as of 1:38 p.m. in Tokyo from 131.79 in New York yesterday, after earlier rising to 131.52, the strongest since Jan. 6. Japan’s currency was at 91.04 per dollar from 90.98. The euro bought $1.4485 from $1.4486. The dollar was at $1.6188 per pound from $1.6164.
The Philippine peso and the Malaysian ringgit led Asian currencies lower as regional stocks fell after the People’s Bank of China yesterday raised the proportion of deposits that banks must set aside as reserves by 50 basis points starting Jan. 18.
Asian Stocks
The MSCI Asia-Pacific Index of regional shares slipped 1.5 percent. Benchmark interest rates of 2 percent in Malaysia and 4 percent in the Philippines compare with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to higher- yielding assets.
The peso dropped 0.3 percent to 45.785 per dollar and the ringgit weakened 0.2 percent to 3.3480.
The euro was near the lowest level since March against the franc before the Federal Statistics Office releases its gross domestic product report in Wiesbaden today. Germany’s economy shrank at an annual rate of 4.8 percent last year, the most since 1971, according to a Bloomberg News survey of economists.
The European Commission said yesterday “severe irregularities” in Greece’s statistical data leave the accuracy of the nation’s budget deficit in doubt. European Central Bank Governing Council member Ewald Nowotny said this week there’s no need for the bank to change its exit strategy in light of concerns about excessive risk-taking.
“There are concerns over European economies, given what’s happening in certain countries such as Greece,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The central bank may postpone any withdrawal from stimulus measures.”
The euro was at 1.4755 francs from 1.4757 yesterday. It fell to 1.4724 on Jan. 11, the weakest since March 11.
Dollar Index
The Dollar Index climbed for the first time in four days after Federal Reserve Bank of Philadelphia President Charles Plosser said policy makers must increase interest rates “well before” unemployment falls to an acceptable level.
With the economy growing, the Fed’s target for overnight lending among banks should rise “as long as inflation is near its desired level and inflation expectations are well- anchored,” Plosser said yesterday in Philadelphia.
“The Fed may be getting ready to start raising ultra-low rates to subdue inflation, even though aggressive rate hikes may have to wait until jobs data improve,” said Kunihiko Nakaji, chief manager of foreign exchange and financial products at Mitsubishi UFJ Trust & Banking Corp. in Tokyo.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against those of six major U.S. trading partners including the euro and yen, rose 0.1 percent to 77.015.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net
