Yen Drops as Greek Bond Sale Proceeds, Boosting Demand for Risk

By Oliver Biggadike and Lukanyo Mnyanda

March 29 (Bloomberg) -- The yen and dollar fell against most of their major counterparts as Greece proceeded with plans for a debt offering, encouraging investors to boost bets on higher-yielding, riskier currencies.

The euro rose as Greece hired banks to sell seven-year bonds in the first sale since European leaders agreed last week on a plan to support the nation as it works to lower a deficit. Japan’s currency fell for a fourth day against the euro in the longest losing streak in five weeks after a report showed U.S. consumer spending increased in February.
“There’s temporary relief over Greece,” said John McCarthy, director of currency trading at ING Groep NV in New York. “It’s also all across the board. The Aussie and kiwi are higher, firmer equity markets, relief over Greece helped pushed the dollar lower.”

The yen declined 0.4 percent to 124.56 per euro at 10:13 a.m. in New York, from 124.06 on March 26. The euro advanced 0.3 percent to $1.3450, from $1.3410. Japan’s currency was little changed at 92.59 per dollar, compared with 92.52. It slipped to 92.96 yen on March 25, the weakest level since Jan. 8.
The euro rose after the European Union enlisted the assistance of the International Monetary Fund last week to help Greece finance the region’s biggest budget deficit should it run out of options in capital markets

Greece’s Bond Issue 

 
Prime Minister George Papandreou’s government has to complete as much as 15.5 billion euros ($20.9 billion) of its 2010 fund raising by the end of May, according to an estimate from the nation’s debt agency.
Greece may price a benchmark issue of bonds to yield about 3.10 percentage points over the benchmark mid-swap rate, according to two bankers involved in the transaction, who declined to be identified before the sale is completed.

The euro has depreciated 6 percent against the dollar this quarter, heading for its biggest loss since the three months ended Sept. 30, 2008, two weeks after Lehman Brothers Holdings Inc. collapsed.
Stocks gained, with both the Standard & Poor’s 500 Index and the MSCI World Index advancing 0.4 percent.

The dollar pared its decline against the euro today as U.S. 10-year Treasuries widened their yield advantage relative to similar-maturity German debt. The spread between the two securities increased 4 basis points to 73 basis points, or 0.73 percentage point, Bloomberg data show.

“Everyone is trying to sell the rallies” in the euro, said Hidetoshi Yanagihara, a senior currency trader at Mizuho Corporate Bank in New York, who predicted the 16-nation currency may fall as low as $1.25 by June. “It may be that some risk aversion may be expected toward the end of this week.”

Payrolls Forecast 

U.S. employers probably added 182,000 jobs in March, the most since 2007, according to the median forecast of 78 economists in a Bloomberg News survey. The Labor Department is scheduled to release its payrolls report on April 2.

“The dollar has picked up significant yield advantage,” Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney, wrote today in a report. “The fall in the euro is entirely justified on the rate moves. The prospect of a strong U.S. payrolls report this week will cap the euro.”

Goldman Sachs Group Inc. and Citigroup Inc. ended bets on a falling dollar last week after the trades lost 2.8 percent. Strategists are raising greenback forecasts at the fastest pace since last March, just before U.S. stimulus efforts that poured as much as $12.8 trillion into the economy ended the currency’s strongest rally in 28 years. Median predictions for the dollar against 47 currencies tracked in Bloomberg surveys rose an average of 1.4 percentage points in the month to March 24.

Euro Wagers 

The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain was a record 74,917 contracts on March 23, according to data from the Commodity Futures Trading Commission.

Australia’s dollar strengthened after Reserve Bank Governor Glenn Stevens said house prices are “getting quite high” and signaled interest rates may need to be increased further.
Stevens told Channel Seven it was important for borrowing costs to be returned to “normal” levels. The interview was recorded on March 22.

Australia’s dollar gained 1.1 percent to 91.43 U.S. cents and advanced 1.2 percent to 84.64 yen. New Zealand’s dollar gained 0.6 percent to 70.85 U.S. cents and rose 0.8 percent to 65.60 yen.

To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net; Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
Last Updated: March 29, 2010 10:18 EDT