Bloomberg News

Yen Gains After Bernanke Spurs Growth Concern; Rand Drops

April 10, 2012

Pedestrians walk past the Bank of Japan headquarters in Tokyo, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

Pedestrians walk past the Bank of Japan headquarters in Tokyo, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

The yen rose for a fifth day versus the dollar and the euro after Federal Reserve Chairman Ben S. Bernanke said the U.S. recovery is far from complete, spurring demand for haven amid bets the central bank will add stimulus.

The Japanese currency advanced against all of its 16 most- traded peers after the Bank of Japan refrained from easing monetary policy. Higher-yielding currencies dropped, led by South Africa’s rand, on concern the global economic recovery is faltering. The euro fell to the lowest level in more than six weeks against the yen as Spanish and Italian government bond yields climbed on concern the region’s debt crisis is spreading.

“We’re seeing general risk-off sentiment,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. “U.S. Treasury bond yields are back down again, which narrows the interest-rate differential. That was one of the things driving the yen lower, and now it’s contributing to the yen’s recovery.”

Japan’s currency appreciated 1 percent to 80.67 per dollar at 5 p.m. New York time, and touched 80.65 yen, the strongest level since March 7. The yen gained 1.2 percent to 105.53 per euro, advancing past its 200-day moving average of 105.96. It reached 105.49 yen, the strongest since Feb. 22. The 17-nation currency fell 0.2 percent to $1.3082.

The yen last gained for five days against the dollar in the period ended Feb. 1. Its last five-day winning streak versus the euro ended on March 6.

Rand Drops

South Africa’s rand slid 1.5 percent to 7.9909 per dollar. The Mexican peso lost 1.4 percent to 13.1578. The U.S. is Mexico’s largest trading partner.

The U.S. economy “is still far from having fully recovered” from the financial crisis more than three years ago, Bernanke said yesterday at a conference in Stone Mountain, Georgia. A report last week showed U.S. employers added the fewest jobs in March in five months.

The data spurred bets the Fed will introduce a third round of quantitative easing after buying $2.3 trillion of debt in two efforts from December 2008 to June to support the economy.

“It puts quantitative easing back on the table,” said David Mann, New York-based regional head of research for the Americas at Standard Chartered Plc. “Probably the single best way to play it, rather than go through the euro, is through the yen.”

U.S. Treasuries rose as investors sought safety, pushing the yield on the benchmark 10-year note below 2 percent for the first time since March 12. The yield touched 2.4 percent on March 20, the highest level since October.

‘Hurting Risky Assets’

“This has been hurting risky assets, and the beneficiary of all this is U.S. Treasuries,” Gary Pollack, head of fixed- income trading at Deutsche Bank AG’s private wealth management unit in New York, which manages $12 billion in bonds. “The 2.40 was a number of things: resolution on Greece, more optimism on the economy as well as the reduced probability of a QE3. All of those three things have turned.”

The difference, or spread, between 10-year Japanese government bond yields and those of comparable Treasuries fell to 1.03 percentage points today, from as high as 1.34 percentage points last month.

The Standard & Poor’s 500 Index (SPX) tumbled 1.7 percent, falling for a fifth day in its longest slump since November.

Swiss Franc

Switzerland’s franc was little changed, trading below the Swiss National Bank’s cap of 1.20 per euro after strengthening above it yesterday for the second time in a week on renewed concern Europe hasn’t stemmed its debt crisis. The franc traded at 1.20149 per euro after touching 1.19962 yesterday.

The Swiss National Bank’s interim chairman, Thomas Jordan, reaffirmed it will enforce the ceiling.

The Bank of Japan (8301) kept its key rate between zero and 0.1 percent and left unchanged its 30 trillion-yen ($370 billion) asset-purchase fund. No board member proposed additional easing at the two-day meeting concluded today, the central bank said.

The yen has weakened 3.9 percent against the dollar since the BOJ set a 1 percent inflation goal on Feb. 14 and increased its planned purchases of government bonds.

Spanish banks may need additional capital if the economy weakens more than expected, Bank of Spain Governor Miguel Angel Fernandez Ordonez said today at a conference in Madrid as he warned the recovery will be slow.

Spanish, Italian Bonds

Spain’s 10-year yields climbed as much as 24 basis points today to touch 5.99 percent, the highest level since December. They jumped more than 40 basis points last week, the biggest surge since the five days ended Jan. 6, as Prime Minister Mariano Rajoy said the nation is in “extreme difficulty.”

Italian (GBTPGR10) 10-year yields rose 23 basis points to 5.69 percent, the highest level since Feb. 17 and up from a nine- month low of 4.68 percent on March 9. Italy will sell 11 billion euros ($14.4 billion) of bills tomorrow, followed by an offering of debt due from 2015 to 2023.

German two- and five-year note yields slid to records today as investors sought safety.

The euro will drop more than 5 percent to $1.24 at the end of 2012, according to Nick Bennenbroek, head of currency strategy at Wells Fargo & Co., who topped a Bloomberg-compiled list of the most-accurate foreign-exchange forecasters for the fourth time out of the past six quarters. Westpac Banking Corp. (WBC), which had the second-lowest margin of error, predicts $1.26.

Europe’s shared currency depreciated 0.4 percent over the past week against nine developed-nation counterparts monitored by Bloomberg Correlation-Weighted Currency Indexes. The dollar advanced 0.9 percent and the yen climbed 3.8 percent.

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Paul Cox at Pcox16@bloomberg.net


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