Yen Rises Versus Euro on Global Slowdown Concern

By Mariko Ishikawa and David Goodman - Sep 3, 2012 4:13 PM GMT+0800

 

The yen rose against higher-yielding currencies such as the Australian and New Zealand dollars as signs a global economic slowdown is deepening increased demand for safer assets.

Japan’s currency appreciated against 13 of its 16 major counterparts after a euro-area report showed manufacturing contracted in August and after similar data showed factory output shrank in China. Australia’s dollar fell to a five-week low versus the greenback after retail sales declined. Federal Reserve Chairman Ben S. Bernanke said last week a third round of bond purchases, or quantitative easing, shouldn’t be ruled out.
“There is safe-haven buying in the markets,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “Investors don’t want to buy the U.S. dollar because of worries about QE3, so that’s why the yen is the safe- haven currency of choice.”

The yen appreciated 0.7 percent to 80.37 per Australian dollar at 9:11 a.m. London time after climbing to 80.12 yen, the strongest level since July 25. It gained 0.6 percent to 62.60 per New Zealand dollar.
Japan’s currency was little changed at 98.54 per euro and 78.36 against the dollar. The euro dropped less than 0.1 percent to $1.2575.

U.S. financial markets are shut today for Labor Day.

A gauge of manufacturing in the 17-nation euro area was 45.1 last month from 44 in July, London-based Markit Economics said today. A level below 50 indicating a contraction. A Chinese purchasing managers’ index of manufacturing compiled by HSBC Holdings Plc and Markit dropped to 47.6 for August, from 49.3 in July, a report today showed.

‘Grave Concern’

Bernanke told central bankers and economists at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming, last week that “nontraditional policies” shouldn’t be ruled out to boost growth and reduce unemployment, which he called a “grave concern.” Speaking on Aug. 31, he said a new round of bond purchases was an option to spur growth.

The U.S. Labor Department’s monthly jobs report on Sept. 7 will show employers added 125,000 workers last month, compared with 163,000 in July, according to another Bloomberg survey. Unemployment will remain at 8.3 percent, according to the estimates. The jobless rate has stayed at or above 8 percent since February 2009.

‘Heighten Expectations’

“If the jobs numbers come in weak, that would significantly heighten expectations of QE3,” said Kengo Suzuki, a currency strategist at Mizuho Securities Co. in Tokyo. “The dollar may test lower over the near term.”

The U.S. currency has fallen 0.7 percent in the past month, according to Bloomberg Correlation-Weighted Indexes. The yen dropped 0.6 percent, and the euro rose 1 percent.
Australia’s dollar declined to a five-week low as the government said retail sales dropped the most in almost two years in July. The so-called Aussie also slid to its weakest in more than a month against the yen after manufacturing shrank in China, the nation’s largest trading partner.

“You have both domestic and external hits to the Aussie,” said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore. “The retail sales number was much worse than expected. The Chinese data is obviously bad for Australian exports, so data is weak across the board.”
The Australian dollar fell 0.6 percent to $1.0257 after dropping to $1.0240, the lowest level since July 25.
Sweden’s krona depreciated after a report showed manufacturing shrank at the fastest pace since May 2009.

The purchasing managers’ index dropped to a seasonally adjusted 45.1 for August from 50.6 in July, Stockholm-based Swedbank AB said.

The krona weakened 0.6 percent versus the euro to 8.3925, and slipped 0.7 percent to 6.6723 per dollar.

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net