Bloomberg News

Yen Rises as JPMorgan Profit Falls; Euro Drops on ECB Bank View

October 13, 2011

Oct. 13 (Bloomberg) -- The yen rallied versus most of its major counterparts as JPMorgan Chase & Co.’s profit fell and European bank stocks dropped, spurring demand for a refuge in Japan’s currency.

Currencies of commodity exporters slumped against the dollar as China’s exports rose less than forecast and the nation’s customs bureau warned of “severe” challenges. The euro slid from the highest level in almost five weeks against the yen after the European Central Bank said involvement of private banks in bailouts would risk financial stability. The 17-nation currency erased its drop versus the dollar as U.S. stocks reduced their decline.

“The terrible levels from China overnight and from stocks being down in the U.S. and in Europe has helped the yen,” said John Doyle, a strategist at the currency-trading firm Tempus Consulting Inc. in Washington. “The euro-dollar cross is tracking equities closely, and the little turnaround in the euro comes from equities pushing up.”

The yen appreciated 0.6 percent to 105.95 per euro at 5 p.m. in New York after sliding yesterday to 107.05, the weakest level since Sept. 9. The dollar was 0.1 percent stronger at $1.3777 per euro after earlier gaining as much as 0.8 percent. The yen advanced 0.5 percent to 76.90 per dollar.

The Standard & Poor’s 500 Index slid 0.3 percent after earlier falling 1.4 percent as JPMorgan’s profit dropped on a slump in earnings from investment banking and trading.

Canadian Dollar

Canada’s currency declined 0.4 percent to C$1.0209 per U.S. dollar as crude oil slid for a third day in New York. Signs of weakening gasoline demand in America and slowing crude imports in China stoked speculation that consumption will falter for the world’s largest energy users.

Crude oil for November delivery decreased 0.6 percent to $84.47 a barrel. The S&P GSCI Total Return Index of 24 raw materials fell for the first time in seven sessions, dropping 0.4 percent.

China’s customs bureau said exports increased a less than forecast 17.1 percent in September from a year earlier. The trade surplus was $14.51 billion, the smallest since May. Growth in shipments to Europe, China’s biggest export market, slumped to 9.8 percent, from 22 percent.

“The market wanted the China numbers to show stronger external demand to lean more toward stabilization and less to slowdown,” said Jessica Hoversen, an analyst at the futures broker MF Global Holdings Ltd. in New York. “Economic indicators are obviously pointing to a slowdown, and the market is trying to assess whether we’re going back into recession or are we muddling along.”

Stronger Won

South Korea’s won appreciated as much as 1 percent to a three-week high of 1,153.58 per dollar as overseas investors bought more of the nation’s shares than they sold.

The Bank of Korea left its benchmark interest rate unchanged at 3.25 percent, a decision predicted by all 15 economists in a Bloomberg News survey.

The euro fell versus the dollar as the ECB said in its monthly bulletin that while private-sector involvement “is certain to place significant stress on the solvency of banks and other private financial institutions in the country concerned, it will also have an impact on the balance sheets of banks” in other nations in the euro region.

Banking Losses

German banks are preparing for losses of as much as 60 percent on their Greek government debt, said three people with knowledge of the matter.

The 46-member Bloomberg Europe Banks and Financial Services index fell as much as 3.3 percent, extending this year’s drop to 29 percent as policy makers decide how to recapitalize banks.

“The fact that these bank stocks, in talks of massive recapitalization, have been hit very hard today tells you that nothing has been resolved and the euro does not have much upside potential,” said John McCarthy, managing director of currency trading at ING Groep NV in New York.

At least 66 lenders would fail a revised European Union stress test and need to raise about 220 billion euros ($302 billion) of capital in a rerun of the exercise that used a 9 percent core Tier 1 capital ratio rather than the 5 percent one used in July, Credit Suisse Group AG analysts said in a report.

The euro pared its drop versus the dollar as Slovakian lawmakers voted 114 to 30 with three abstentions to support the European Financial Stability Facility in the second attempt this week after parliament failed to approve the measures Oct. 11.

Europe’s currency has fallen 3.6 percent over past 12 months, according to Bloomberg Correlation-Weighted Indexes, which track the currencies of 10 developed nations. The dollar has weakened 1.1 percent and the yen has risen 5.4 percent.

Japan’s currency tends to appreciate during economic and financial turmoil because the nation’s current-account surplus makes the nation less reliant on foreign capital. The dollar benefits as the world’s main reserve currency.

--With assistance from Aaron Kirchfeld in Frankfurt and Gavin Finch in London. Editors: Dennis Fitzgerald, Greg Storey

To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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