Yen Strengthens Against Dollar, Euro as Stock Declines Sap Risk Appetite
Oct. 27 (Bloomberg) -- The yen advanced against the dollarand the euro as stocks declined, sapping demand for higher-yielding currencies.
The Japanese currency climbed the most versus the SouthKorean won and Swedish krona as the MSCI World Index of sharesfell for a sixth day. The Australian dollar rose against all butthree of the 16 most-traded currencies after a Chinesegovernment official said industrial production may rise 16percent in the fourth quarter, fueling demand for raw materials.The U.S. dollar was little changed, after gaining the mostagainst the euro since August yesterday.
“The market is still a little wary from yesterday’scorrection and may need a bit longer for risk appetite to comeback,” said Michael Klawitter, a foreign-exchange strategist inFrankfurt at Commerzbank AG, Germany’s second-biggest lender.“I would continue to bet on the outperformance of theAustralian dollar.”
The yen was at 136.74 per euro as of 9:33 a.m. in London,from 137.10 yesterday in New York, and 91.93 per dollar, from92.19. Australia’s dollar climbed to 91.71 U.S. cents, from91.62 cents. The U.S. dollar was at $1.4873 per euro, from$1.4876 yesterday, when it strengthened 0.9 percent, the mostsince Aug. 7.
The MSCI World Index fell 0.5 percent today, building onits 1.2 percent drop yesterday, the biggest decline since Oct.2. The three-month implied volatility on euro-yen options roseto 12.88 percent, the most in more than a week, suggestinginvestors expect the currencies to move in a wider range.
‘Vulnerable’ Equities
“Equities look vulnerable to a correction, which wouldoffer the dollar some respite,” Derek Halpenny, European headof currency strategy at Bank of Tokyo-Mitsubishi UFJ Ltd. inLondon, wrote in a report today.
China’s industrial production may pick up pace this quarterafter advancing 13.9 percent in September, according to Ministryof Industry and Information Technology spokesman Zhu Hongren,who gave an online briefing today.
The aussie was also buoyed after National Australia BankLtd. said an index of the nation’s business confidence rose to16 points in the quarter, from minus 4 points in the previousthree-month period. The quarterly survey of 930 companies wasconducted between the end of August and early September.
“This global pool of investible funds has to findsomewhere to get yield,” David Forrester, a currency economistin Singapore at Barclays Capital, said in a Bloomberg Televisioninterview. “Commodity currencies are generally offering that.We do prefer the commodity currencies.”
Japanese Repatriation
The yen also rose from a five-week low versus the dollaron speculation Japanese companies are bringing back earnings onoverseas assets before the end of the month.
Large Japanese manufacturers expected the yen to average94.50 per dollar in the 12 months to March 2010, according tothe Bank of Japan’s quarterly Tankan survey released Oct. 1. Theforecast in the previous report was for a rate of 94.85.
“There’s talk that exporters are buying the yen,” saidLee Wai Tuck, a currency strategist at Forecast Pte inSingapore. “This is causing the dollar-yen to dip.”
To contact the reporter on this story:Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
Last Updated: October 27, 2009 05:58 EDTSource: Bloomberg
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