By Oliver Biggadike and Bo Nielsen
Aug. 24 (Bloomberg) -- The yen weakened for a third day against the euro as improving economic data and central bank comments that the global recession is abating spurred investors to buy higher-yielding assets.
Japan’s currency fell versus the South Korean won and the Australian and New Zealand dollars as stocks extended a rally after Federal Reserve Chairman Ben S. Bernanke said last week chances for near-term growth “appear good.” The euro traded near the highest level in a week versus the yen as a report showed European industrial orders climbed the most in 19 months.
“Those comments from the central bankers at the symposium in Wyoming have helped the market,” said Vassili Serebriakov, currency strategist at Wells Fargo & Co. in New York. “For a while we’ve seen interest in some of those carry-trade currencies like the Australian and New Zealand dollars.”
The yen slid 0.4 percent to 135.72 versus the euro at 10:03 a.m. in New York, from 135.21 on Aug. 21. It earlier declined to 136.09 per euro, the weakest level since Aug. 14. Japan’s currency depreciated 0.4 percent to 94.72 per dollar. The dollar traded at $1.4332 per euro, compared with $1.4326.
The euro climbed against the yen as the European Union’s statistics office in Luxembourg said orders at industrial companies rose 3.1 percent in June from the prior month, the biggest increase since November 2007. The production and income category of the Federal Reserve Bank of Chicago’s National Activity Index increased last month, a report today showed.
German business confidence probably advanced in August for a fifth month, according to the median forecast of 41 analysts in a Bloomberg News survey before the Munich-based Ifo institute’s report on Aug. 26.
“An expected rise in the Ifo index will lend some support for the euro, especially against the dollar,” said Masashi Nakamura, a Tokyo-based economist at Mizuho Research Institute Ltd., a unit of Japan’s second-largest banking group. The euro may trade as high as $1.4410 this week, he said.
The yen fell 1.2 percent to 13.09 won, declined 1.2 percent to 79.74 against the Australian dollar and weakened 1.1 percent to 65.12 versus the New Zealand dollar on speculation carry- trade investors in Japan will sell the currency to buy higher- yielding assets elsewhere.
“We’ll see a continuation of the risk rally, and that’s consistent with yen weakness,” said Henrik Gullberg, a London- based currency strategist at Deutsche Bank AG, which Euromoney Institutional Investor Plc ranks as the world’s biggest foreign- exchange trader. “The economic data has been sufficiently strong to persuade even the more bearish in the market.”
In the carry trade, investors borrow in a nation with low interest rates and invest where returns are higher. Benchmark interest rates are 3 percent in Australia, 2.5 percent in New Zealand and 2 percent in South Korea, compared with 0.1 percent in Japan and a range of zero to 0.25 percent in the U.S.
The Standard & Poor’s 500 Index rose 0.5 percent after adding 2.2 percent last week and touching a 10-month high as a report showed sales of existing U.S. homes climbed in July more than economists forecast.
Speaking at the annual central bankers’ symposium in Jackson Hole, Wyoming, last week, Bernanke and European Central Bank President Jean-Claude Trichet said the world economy is pulling out of its deepest recession since the 1930s.
“Prospects for a return to growth in the near term appear good,” while “critical challenges remain,” including possible further losses for financial firms, Bernanke said Aug. 21.
Trichet said at the conference the following day there are signs confirming that the economy “is starting to get out of the period of freefall.” This “does not mean at all that we do not have a very bumpy road ahead of us,” he said.
“Bernanke was the cheerleader of growth, Trichet expressed cautiousness on the growth outlook,” Hans-Guenter Redeker, the London-based global head of currency strategy at BNP Paribas SA, France’s biggest bank, wrote in a note today.
The Australian dollar rose for a fifth day against its U.S. counterpart, erasing losses this month that were stoked by concern China will slow lending and trim its demand for commodities. Australia’s currency strengthened 0.7 percent to 84.08 U.S. cents.
Currency traders who’ve made Australia’s dollar the third- best performer in the world this year say the rally may end.
Options to sell the Australian dollar in the next month cost 2.32 percentage points more than contracts to buy the currency on Aug. 18, a day after China’s Shanghai Composite dropped by the most in nine months. That’s the biggest premium on puts since Feb. 17, reversing the 0.445 percentage point extra that traders were willing to pay for the right to buy the Aussie in March, when it gained 8 percent.
To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net; Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
Last Updated: August 24, 2009 10:05 EDT
Posts
0 comments:
Post a Comment