March 31 (Bloomberg) -- The yen dropped toward an eight- week low versus the euro as signs the global recovery is gathering steam damped demand for Japan’s currency as a refuge.
The yen headed for a monthly loss versus all 16 of its major counterparts before reports forecast to show U.S. companies added jobs and confidence among Japan’s large manufacturers improved. South Korea’s won fell on speculation the central bank is seeking to curb an appreciation that may hurt exports. The Australian dollar slid after retail sales unexpectedly declined in February.
“As the global economic outlook improves and investor sentiment becomes normal, money will move from low-yielding nations to high-yielding ones,” said Daisuke Ueno, Tokyo-based president at Gaitame.Com Research Institute Ltd., a unit of Japan’s largest currency margin company. “The bias is for currencies to rise against the yen as risk sentiment picks up.”
The yen dropped to 125.03 per euro as of 7:01 a.m. in London from 124.44 yesterday, when it touched 125.46, the weakest since Feb. 4. Japan’s currency slipped to 93.23 per dollar from 92.76, after earlier declining to 93.60, the lowest level since Jan. 8. The euro was at $1.3410 from $1.3414.
The European currency has fallen 6.4 percent versus the dollar this quarter amid concern Greece’s debt woes would derail a recovery in the euro-zone. That would be the currency’s worst performance since an 11 percent drop in the three months ended September 2008.
Recovery Signs
U.S. companies added 40,000 jobs this month, the most since December 2007, according to a Bloomberg survey before ADP Employer Services releases the figures today. The Labor Department’s nonfarm jobs report on April 2 is forecast to show employers added 184,000 positions. the most in three years.
“The market seems willing to play the positive feedback loop with consumer appetite, gains in households’ wealth and employment gains reinforcing each other, and making the U.S. recovery more real and more sustainable,” Sebastien Barbe, head of emerging-market research at Credit Agricole CIB in Hong Kong, wrote today in a research note.
The Bank of Japan will say in its Tankan survey tomorrow that confidence among Japanese large manufacturers was minus 14 in the three months ended March from minus 24 the prior quarter, according to a Bloomberg News survey. That would be the best reading since September 2008.
The won fell against the dollar for the first time in four days on speculation the Bank of Korea wants to temper gains, said Gerrard Katz, head of foreign-exchange trading at Standard Chartered Plc in Hong Kong.
Won Consolidation
“I haven’t seen any official comments from the BOK but there’s rumors in the market that they’re in at these levels,” Katz said. “We’re at that level where we’re likely to see a bit of consolidation in the won.”
The won slid 0.2 percent to 1,132.05 per dollar. The Indonesian rupiah dropped 0.3 percent to 9,115.
BOK minutes yesterday showed board members voted unanimously to keep the benchmark interest rate at a record low in February to help sustain the economic recovery and expressed concern about risks for growth.
Australia’s dollar fell for the first time in three days, dropping 0.6 percent to 91.44 U.S. cents. The Bureau of Statistics said the nation’s retail sales dropped 1.4 percent from January, when they rose a revised 1.1 percent. Economists surveyed by Bloomberg News forecast a 0.3 percent increase.
‘Awful’ Numbers
“That was a very awful set of retail sales numbers with broad-based losses,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Hong Kong. “Aussie has collapsed on the number and I’d expect that to continue given that a large factor causing the Aussie’s outperformance in the past week has been expectations of a rate hike next week.”
The bureau also said the number of permits granted to build or renovate houses and apartments decreased 3.3 percent from January, when they dropped a revised 5.5 percent. The estimate in a Bloomberg survey was for a 2.1 percent gain.
The Institute for Supply Management’s U.S. factory index rose to 57.0 in March from 56.5 in February, a Bloomberg survey showed before the report is released tomorrow.
Futures on the CME Group Inc. exchange yesterday showed a 59 percent chance the Fed will raise its target rate for overnight bank lending by at least a quarter-percentage point by its November meeting, compared with 48 percent odds a month ago.
“Expectations for good American data are heightening,” said Shinichi Hayashi, a dealer in Tokyo at Shinkin Central Bank, the central institution for Japan’s financial cooperatives. “Among the U.S., Europe and Japan, the U.S. is closest to taking exit strategies. There’s a bias for dollar strength.”
The dollar’s one-month 25-delta risk reversal rate against the yen narrowed to minus 0.08 percent today from minus 0.13 percent yesterday, indicating a shrinking premium for dollar puts that allow sales, over dollar calls that give holders the right to buy. The risk-reversal rate reached minus 0.01 percent on March 29, the least since March 2004.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
Last Updated: March 31, 2010 02:04 EDT
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