Bloomberg News

Yen, Dollar Weaken on U.S. Growth Outlook, Optimism Over Greece

February 18, 2012

Feb. 17 (Bloomberg) -- The yen and dollar declined as signs the U.S. economy is gaining momentum and optimism European leaders will reach an accord to rescue Greece reduced demand for haven assets.

South Korea’s won and New Zealand’s dollar led gains in higher-yielding currencies before a U.S. report that economists said will show an index of leading indicators improved for a fourth month. The euro climbed to a two-month high against the yen on speculation European finance ministers will approve the Greek rescue at a meeting next week. The pound rose for a fifth day against the yen after U.K. retail sales increased.

“A risk-on currency strategy has been playing out well given economic numbers out of the U.S. are mostly positive,” said Peter Rosenstreich, chief currency strategist at Swissquote Bank SA in Geneva. “There’s ample liquidity in the system, and optimism increases that there will be a second bailout deal for Greece. There are still a lot of uncertainties.”

The yen fell 0.3 percent to 103.95 per euro at 7:01 a.m. in New York after sliding to 104.09, the weakest level since Dec. 9. The dollar slipped 0.1 percent to $1.3139 per euro after falling 0.5 percent yesterday. The yen slid 0.3 percent to 79.15 per dollar. It earlier touched 79.18, the weakest since Oct. 31.

The New York-based Conference Board’s gauge of the U.S. outlook for the next three to six months increased 0.5 percent in January after climbing 0.4 percent in December, according to a Bloomberg News survey before today’s report. The cost of living climbed 0.3 percent last month from December, economists projected before today’s Labor Department data.

‘There Is Momentum’

“It’s very clear to us that there is momentum in the U.S. economy,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. Investors are taking “any opportunity that they have to buy risk and sell dollars.”

The Stoxx Europe 600 Index advanced 0.7 percent, and the MSCI All-Country World Index gained 0.6 percent, set for the highest close since Aug. 1.

The yen has tumbled 6.2 over the past month and the dollar dropped 3.1 percent, the worst performers among 10 developed- market currencies according to Bloomberg Correlation-Weighted Indexes. The euro gained 0.4 percent over the period.

‘Yen Weakness’

The yen weakened beyond 79 per dollar today for the first time since the central bank intervened in foreign-exchange markets on Oct. 31 to sell the currency.

“The drivers of sudden yen weakness remain elusive as they been all week,” Adam Cole, head of currency strategy at RBC Capital Markets in London, wrote today in a note to clients. “We maintain a positive medium term view on the yen and see no fundamental reason for the supply-demand balance to have suddenly shifted.”

Officials say the European Central Bank is swapping its Greek bonds for new ones and the move may be completed by Feb. 20. That may pave the way for a private-sector bond swap and convince euro-area finance ministers to agree to a second bailout for Greece when they meet that day in Brussels.

New Zealand’s dollar strengthened 0.5 percent to 83.71 U.S. cents and rose 0.8 percent to 66.26 yen. The won appreciated 0.6 percent to 1,125.50 per dollar.

New Zealand’s benchmark rate is 2.5 percent and South Korea’s is 3.25 percent, compared with as low as zero in the U.S. and Japan.

Pound Gains

The pound climbed to a three-month high against the yen as the retail-sales report fueled speculation the U.K. economy will dodge a recession.

Sales including fuel climbed 0.9 percent from December, when they rose 0.6 percent, the Office for National Statistics said today. Economists forecast a 0.3 percent decline, according to a Bloomberg News survey.

“The retail sales data helped the pound, it was surprisingly good,” said Steven Barrow, head of Group of 10 research at Standard Bank Plc in London. “The numbers look genuinely good and may be something that helps the momentum of sterling. It makes me a little bit more positive that growth in the first quarter won’t fall, avoiding a technical recession.”

The pound gained 0.2 percent to $1.5828, extending its weekly advance to 0.4 percent. Sterling rose 0.5 percent to 125.29 yen after reaching 125.37, the strongest since Nov. 8.

--With assistance from Kristine Aquino and Clarissa Batino in Manila. Editors: Paul Dobson, Nicholas Reynolds

To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

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


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