BLBG: Yen Drops a 2nd Day as Australian Jobs Rise More Than Forecast
By Yoshiaki Nohara and Ron Harui
Jan. 14 (Bloomberg) -- The yen weakened for a second day against higher-yielding currencies after an Australian report showed employment increased more than economists forecast, boosting demand for riskier assets.
Japan’s currency fell the most against Australia’s dollar and South Korea’s won among its 16 major counterparts as Asian stocks rose on optimism the global economic recovery is gaining momentum. The greenback declined toward a four-week low against the euro after New York Federal Reserve Bank President William Dudley said U.S. interest rates may remain low, encouraging investors to borrow in dollars and buy assets with higher returns elsewhere.
“Risk sentiment is likely to benefit from the good jobs report in Australia,” said Akane Vallery Uchida, a currency strategist in Tokyo at Royal Bank of Scotland Group Plc, the U.K.’s biggest government-controlled lender. “The Aussie-yen will probably lead cross-yen currencies higher.”
The yen dropped 1 percent to 85.26 per Australian dollar as of 2:07 p.m. in Tokyo from yesterday in New York. Japan’s currency fell 0.7 percent to 12.236 won, 0.5 percent to 133.33 per euro, and 0.3 percent to 91.69 per dollar. The dollar weakened to $1.4534 per euro from $1.4510 yesterday when it slipped to $1.4579, the lowest since Dec. 16.
Australia’s dollar strengthened against all 16 most-traded currencies after the statistics bureau said the number of people employed in the nation rose 35,200 in December from the previous month. The median estimate of economists surveyed by Bloomberg was for an increase of 10,000. The jobless rate fell to 5.5 percent from a revised 5.6 percent.
‘Strong Data”
“Strong data in Australia are bolstering confidence for another rate increase,” said Daisuke Karakama, a market economist in Tokyo at Mizuho Corporate Bank Ltd., Japan’s second-largest publicly traded lender. “Risk is on as stocks gain and the Fed has lowered expectations for rate hikes.”
The odds that the Reserve Bank of Australia will raise its target rate by 25 basis points when it meets on Feb. 2 increased to 76 percent from 60 percent yesterday, according to a Credit Suisse AG index. The benchmark rates of 0.1 percent in Japan and as low as zero in the U.S. have made the yen and the dollar popular funding currencies for so-called carry trades.
Malaysia’s ringgit and South Korea’s won led Asian currencies higher as regional stocks climbed. The MSCI Asia- Pacific Index of shares advanced 1.1 percent. The ringgit gained 0.4 percent to 3.3340 per dollar, and the won climbed 0.3 percent to 1,122.25.
Producer Prices
The yen also weakened after Japanese reports showed producer prices fell for a 12th month and machine orders unexpectedly declined, adding to speculation the government will take more measures to combat deflation and revive growth.
The costs companies pay for energy and unfinished goods tumbled 3.9 percent in December from a year earlier, the Bank of Japan said today in Tokyo. Machine orders, an indicator of business investment in three to six months, slid 11.3 percent in November, the Cabinet Office said.
“The basic scenario is for the government to implement monetary easing and fiscal policies to fight deflation,” said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust & Banking Co., a unit of Japan’s largest brokerage. “The trend for yen weakness is likely to remain unchanged.”
Dollar Index
The Dollar Index declined for a fifth day, its longest stretch since September, as traders added to bets the Fed will keep borrowing costs near zero to spur growth.
“The dollar will remain in a downtrend,” said Toshiya Yamauchi, manager of currency margin trading at Ueda Harlow Ltd. in Tokyo. “Expectations for Fed rate hikes have waned.”
Futures trading in Chicago yesterday showed a 34 percent chance that the Fed will raise its target lending rate by at least a quarter-percentage point by its June meeting, down from about 41 percent odds a week earlier.
Dudley said yesterday he wants to see job growth before rate increases, according to a transcript of an interview with PBS Television’s Nightly Business Report. Dudley said he expects short-term borrowing costs to stay low for a “considerable period.”
The Dollar Index, which the IntercontinentalExchange Inc. uses to track the currency against those of six major U.S. trading partners including the euro and the yen, fell 0.1 percent to 76.798.
The Australian dollar also gained as Zheng Xiaosong, director general of the international department at China’s Ministry of Finance, said ending global stimulus programs too early may hurt the recovery.
China’s central bank on Jan. 12 unexpectedly raised the proportion of deposits banks must set aside as reserves by half a percentage point starting Jan. 18.
“Zheng’s comments aim to ease concerns about China’s early tightening,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. “The bias is for commodity currencies to be bought.”
