Yen Set for Weekly Gain Versus Most Peers on Slowdown

By Mariko Ishikawa and Monami Yui - Sep 21, 2012 12:08 PM GMT+0800

The yen headed for a weekly gain against most major peers as signs of a global economic slowdown spurred demand for the refuge of Japan’s currency.

The euro was poised for the biggest five-day decline since July against the greenback before data next week forecast to show German business sentiment remained near the lowest in more than two years. The International Monetary Fund will cut economic forecasts for the global economy “by a few decimal points,” a fund official said yesterday.
 
“The market’s focus has shifted to economic fundamentals from monetary policy actions by global central banks,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “Buying pressure on the yen is likely to increase should data continue to confirm signs of a slowdown.”
The yen was little changed at 78.25 per dollar as of 12:33 p.m. in Tokyo from 78.24 in New York, poised for a 0.2 percent advance this week. The Japanese currency traded at 101.53 per euro from 101.47 yesterday, when it strengthened 0.8 percent. It has gained 1.4 percent since Sept. 14.
The euro bought $1.2974 from $1.2968, headed for a 1.2 percent drop this week, the biggest loss since the five days ended July 6.

The Ifo institute in Munich will probably say its business climate index, based on a survey of 7,000 executives, was at 102.8 this month from 102.3 in August, according to the median estimate of economists surveyed by Bloomberg News before the data on Sept. 24. Last month’s reading was the lowest since March 2010.

Global Economy

“The European economy is weak,” said IG’s Ishikawa. “German data has been bad and it’s putting some downward pressure on the euro.”
Reports yesterday showed a composite index for manufacturing and services industries in the euro area dropped to a three-year low and a factory output gauge in China signaled contraction for an 11th month.
“The global economy has weakened, we are shaving off our forecast for global growth by a few decimal points,” Khor Hoe Ee, an assistant director in the IMF’s Asia and Pacific Department, said on a conference call with reporters.

The euro is poised to drop to $1.2829, its 200-day moving average, after failing to rise above $1.3178, the 78.6 percent retracement from this year’s high in February to the low in July on the Fibonacci chart, Cilline Bain, an analyst at Credit Suisse Group AG, wrote in a note to clients yesterday.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Resistance refers to an area where sell orders may be clustered, whereas support is where there may be orders to buy.

Rajoy, Monti

Losses in the euro were limited before Spanish Prime Minister Mariano Rajoy meets his Italian counterpart Mario Monti today in Rome. The Financial Times reported that Spanish and European Union officials were working on plans to trigger European Central Bank bond purchases.
The plan will be announced on Sept. 27 and will focus on structural reforms to the Spanish economy requested by the EU, rather than new taxes and spending cuts, the newspaper said yesterday, citing officials involved in the talks.
The euro rallied 2.1 percent in the past month, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 2.3 percent and the yen weakened 0.9 percent.
Morgan Stanley recommended in a note today buying the U.S. dollar at 78 yen, targeting an appreciation to 85.

Australia’s currency rebounded from a one-week low as the MSCI Asia Pacific Index (MXAP) of stocks advanced 0.6 percent and on speculation Spain may get financial assistance.
The so-called Aussie rose 0.3 percent to $1.0464 from yesterday, when it touched $1.0368, the lowest since Sept. 11.
“We’re getting much closer to a formal Spanish bailout and that kind of reduces some of the tail risk associated with the European outlook,” said Jonathan Cavenagh, a Singapore-based currency strategist at Westpac Banking Corp. (WBC) “That’s definitely going to be supporting the Aussie in the near-term.”

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net