BS: Yen Rises as Stocks Snap Two Days of Gains, Damping Risk Demand
By Matthew Brown and Yoshiaki Nohara
March 9 (Bloomberg) -- The yen rose against the euro and the dollar as the MSCI World Index of shares snapped two days of gains, trimming Japanese investor demand for higher-yielding assets outside the country.
Japan’s currency gained versus all 16 of its major counterparts, climbing most against the British pound, on speculation that companies are repatriating profits before the end of the fiscal year in April. The U.K. currency dropped against 15 of its 16 of its peers after a house price gauge was weaker than economists had forecast, a sign the country’s recovery may be running out of steam. The MSCI index slipped 0.2 percent, after climbing 0.4 percent yesterday.
“It’s a bit of a risk off day and it only takes a pause in outflows from Japan for the yen to rise,” said Simon Derrick, chief currency strategist at BNY Mellon Corp. in London. “The yen may continue to strengthen towards the end of the fiscal year.”
The yen strengthened to 122.54 per euro as of 8:45 a.m. in London from 123.13 in New York yesterday when it dropped to 123.90, the weakest level since Feb. 23. Japan’s currency gained to 90.06 per dollar from 90.31. The euro traded at $1.3607 from $1.3634. Sterling slid 0.5 percent to $1.4994 from $1.5066.
Japan’s large manufacturers expect the yen to average 91.16 per dollar in the six months to March 2010, according to the Bank of Japan’s quarterly Tankan survey. A stronger yen erodes the profits of exporters.
‘More Repatriation’
“There’s talk of more repatriation of the yen this week,” said Yuji Saito, director of the foreign-exchange department in Tokyo at Credit Agricole CIB, a unit of France’s largest bank by branches. “This is a factor for the yen to be bought.”
Tax breaks initiated by Japan last year to foster the nation’s economic recovery may lead to “larger than usual” repatriations, Geoffrey Yu, a foreign-exchange strategist at UBS AG, the world’s second-largest currency trader, wrote in a report yesterday. UBS also estimated transfers of overseas earnings for 2009 would exceed $16 billion.
The yen also rose amid speculation foreign investors will buy the currency ahead of the share listing of Dai-ichi Mutual Life Insurance Co.
“The market may see a large amount of yen buying tied to the initial public offering,” said Takashi Kudo, general manager of market information in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “Demand for speculative yen-buying may rise.”
Dai-ichi, Japan’s second-largest life insurer, tentatively priced the shares at 125,000 yen to 155,000 yen each for listing on April 1, according to a filing yesterday. It will sell 4.6 million shares in Japan and 2.5 million shares overseas, the filing said.
Pound Weakens
The pound slid after the Royal Institution of Chartered Surveyors reported the number of agents and surveyors saying U.K. house prices rose exceeded those reporting declines by 17 percentage points in February. Economists had predicted 30 points in a Bloomberg survey.
“The data was worse than expected, which probably sparked some selling of the pound,” said Nobuaki Kubo, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of New York-based Brown Brothers Harriman & Co. “There are still lingering worries over the sustainability of the U.K.’s economic recovery.”
China’s currency faces increasing expectations that it will appreciate because of a widening interest-rate differential, the State Administration of Foreign Exchange said in a statement in Beijing today. That is attracting money into the country, according to the administration.
Year Since Bottom
The yuan was unchanged today at 6.8264 per dollar. Twelve- month non-deliverable forwards in the currency traded at 6.6425, according to Bloomberg data. The contracts touched 6.6260 yesterday, the strongest since Feb. 1.
Today marks one year since the Standard & Poor’s 500 Index closed at a 12-year low. The benchmark has surged 68 percent surge since then. In the past year, the Dollar Index, which tracks the U.S. currency against those of six of the nation’s main trading partners, has fallen 9.6 percent as signs of a global recovery damped demand for the greenback.
--With assistance from Hiroko Komiya and Taku Kato in Tokyo and Ron Harui in Singapore. Editors: David Clarke, Keith Campbell.
To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
