Bloomberg News

Yen Falls on Concern Japan Will Intervene; Aussie, Kiwi Advance

July 13, 2011

July 13 (Bloomberg) -- The yen weakened from its strongest level since policy makers jointly intervened in foreign-exchange markets in March amid speculation Japan will sell its currency again to support exporters.

The yen fell versus all its major counterparts after Finance Minister Yoshihiko Noda said its moves have been “a bit one-sided.” The currency earlier climbed to 78.50 per dollar, the strongest since March 17, as concern Europe’s debt crisis is spreading boosted demand for refuge assets. The Australian and New Zealand dollars rose after data showed China’s economic growth expanded by more than analysts predicted.

“The market is cautious about a possible intervention,” said Daisaku Ueno, Tokyo-based president of Gaitame.com Research Institute Ltd., a unit of Japan’s largest online currency broker. “The yen was sold off in the early morning in Asia while the market was thin. That reminds me of how the March intervention happened.”

Japan’s currency fell to 79.35 per dollar as of 8:13 a.m. in London from 79.24 in New York yesterday, after gaining 2.5 percent in the previous three days. The yen dropped to 111.36 per euro from 110.74 per euro. It rose to 109.58 yesterday, the strongest since March 17. The euro was at $1.4028 from $1.3976 yesterday, when it touched $1.3837, the weakest since March 11.

Japan’s Chief Cabinet Secretary Yukio Edano echoed Noda’s comments, saying rapid foreign-exchange moves were not “desirable.” Group of Seven nations jointly sold Japan’s currency on March 18 after the yen surged to a postwar record of 76.25 per dollar the previous day, threatening the nation’s recovery from the March 11 earthquake and tsunami.

‘Not Helpful’

“What they’re concerned about is their export competitiveness much like the rest of Asia,” said Douglas Borthwick, head of foreign-exchange trading at Stamford, Connecticut-based Faros Trading. “Obviously a stronger yen isn’t helpful toward that.”

Borthwick predicted Japan would be prompted to sell yen if the currency gained about 1 percent more against China’s yuan and 5 percent versus the South Korean won.

The yen’s relative strength index against the euro climbed above 70 yesterday, a level some traders see as a sign an asset’s price has risen too fast and is poised to reverse direction.

Japan’s currency tends to strengthen during economic and financial turmoil because the nation’s trade surplus makes it less reliant on foreign capital.

Aussie, Kiwi Gain

Australia’s dollar rose for the first time in four days against the yen and the greenback after China’s economic data pushed up stocks across Asia.

China’s gross domestic product increased 9.5 percent in the second quarter from a year earlier, the statistics bureau said in Beijing. The median estimate was 9.3 percent in a Bloomberg News survey of economists. Industrial output advanced 15.1 percent in June, the most since May 2010.

Today’s economic data “does break the recent string towards disappointment from numbers out of China,” said Todd Elmer, head of Group-of-10 currency strategy for Asia ex-Japan at Citigroup Inc. in Singapore. “It could help to ease some of the downward pressure on the Aussie and kiwi.”

Australia’s dollar strengthened 0.5 percent to $1.0655, and gained 0.8 percent to 84.63 yen. The New Zealand currency advanced 0.7 percent to 82.38 U.S. cents.

Europe Concern

Gains in the euro were tempered on concern the region’s debt crisis will spread after Ireland yesterday became the third euro-area nation to have its credit rating cut to below investment grade.

Moody’s Investors Service lowered Ireland to Ba1 from Baa3 yesterday, citing the probability the country will require additional official financing. The outlook remains “negative,” Moody’s said in a statement.

The Italian Treasury is scheduled to sell as much as 5 billion euros of bonds tomorrow amid concern it will be drawn into the turmoil that’s forced Greece, Ireland and Portugal to seek bailouts.

“The euro is a sell on rallies at the moment as I can’t see any light yet out of Europe,” said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. “Italy is a big concern and it’s the whole contagion trade.”

--With assistance from Candice Zachariahs in Sydney, Kristine Aquino in Singapore and Seyoon Kim in Seoul. Editors: Matthew Brown, Keith Campbell

To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net.

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.


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