Yen Falls Against Major Peers Before Japanese GDP Report

By Monami Yui and Mariko Ishikawa - Nov 9, 2012 2:59 PM GMT+0800

The yen weakened against its major peers before data next week forecast to show Japan’s economy shrank in the third quarter, adding to signs that world’s third- largest economy is lagging behind the U.S. and China.
The Japanese currency snapped a two-day gain versus the euro after reports showed faster-than-expected growth in China’s industrial production and retail sales. Australia’s dollar rose as Asian stocks pared losses. Demand for the 17-nation euro was limited after a European Union official said a decision on unlocking funds for Greece may not be made until late November.

“My bias is for yen to go weaker,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “The Japanese economy isn’t doing well. It’s troubled and the domestic market is flat, so it’s hard to find reasons to buy the yen.”
The Japanese currency fell 0.3 percent to 101.62 yen per euro as of 6:56 a.m. in London from 101.30 yesterday, paring its weekly advance to 1.6 percent. It slid 0.1 percent to 79.53 per dollar. The euro rallied 0.2 percent to $1.2777 after yesterday touching $1.2717, the weakest since Sept. 7.

The Australian dollar advanced 0.2 percent to $1.0426, set for a 0.9 percent gain since Nov. 2. The MSCI Asia Pacific Index (MXAP) of stocks was down 0.3 percent, having earlier fallen as much as 0.8 percent.
Japan’s gross domestic product probably contracted at an annualized rate of 3.4 percent in the three months through Sept. 30, according to the median forecast of economists in a Bloomberg News survey before a report due Nov. 12. That would be the biggest decline since last year’s record earthquake.

‘Three-Way Standoff’

“It’s a three-way standoff for the dollar, yen and euro,” said Masashi Murata, a currency strategist in Tokyo at Brown Brothers Harriman & Co. “The yen is unlikely to be a clear gainer against the dollar or the euro given the Japanese economy is on a downward trajectory.”

China’s National Bureau of Statistics said industrial production rose 9.6 percent last month from a year earlier, compared with the 9.4 percent median estimate in a Bloomberg survey of analysts. Retail sales climbed 14.5 percent in October from a year earlier. Economists projected a 14.4 percent gain. Another report today showed inflation unexpectedly cooled to the slowest pace in 33 months.
In the U.S., the Thomson Reuters/University of Michigan consumer sentiment index probably climbed to 83 in November, according to economists surveyed by Bloomberg before a preliminary reading of the gauge due today. That would be an increase from the 82.6 reading for October that was the highest since September 2007.

Forecast Cut

The so-called Aussie dollar headed for a weekly gain as the Chinese data buoyed investor sentiment after the Reserve Bank of Australia cuts its forecast for domestic growth.
The central bank predicted year-average gross domestic product growth of 2.25 percent to 3.25 percent in 2013 for Australia, lower than its August estimate of 2.75 percent to 3.25 percent, according to its quarterly monetary policy statement released today. China is the South Pacific nation’s largest trading partner.
“Chinese data has visibly improved,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “It continues to promote a sense that China’s economy is stabilized and may be improving. It’s consistent with a firming Australian dollar.”

Aid Negotiations

Gains in Europe’s single currency were limited today after an EU official said euro-area finance ministers may not make a decision on unlocking funds for Greece until late this month as they await a full report on the country’s compliance with the terms of its bailout.
Finance chiefs won’t make the call to release 31.5 billion euros ($40.2 billion) of aid for Greece that has been frozen since June when they meet in Brussels on Nov. 12, the official said yesterday on condition of anonymity because the deliberations are private.

Greek Prime Minister Antonis Samaras yesterday mustered the support of enough lawmakers to secure approval of a bill on pension, wage and benefit cuts needed for bailout funds to flow. The parliament will convene again on Nov. 11 to vote on the 2013 budget.
Reports on Greece “cast new doubts on an already troubled area,” said St. George’s Kunnen. “The Greek economy is in a dire state, with or without aid, and that is making everybody continually nervous. The euro will stay under pressure.”

The shared currency has declined 6 percent over the past year, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar added 0.3 percent and the yen fell 2.1 percent.

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