The yen climbed to the strongest level in six weeks against the euro and gained versus all its most-traded counterparts as signs global growth is slowing underpinned demand for the relative safety of the currency.
The dollar rose versus most major peers as the euro slid below $1.22 for the first time since July 2010 and the pound dropped on concern the European crisis remains unresolved. The Bank of Japan (8301) refrained from expanding stimulus, adding to haven demand. The Australian dollar tumbled after employers cut jobs, while Canada’s currency erased losses as crude oil, the nation’s biggest export, ended a retreat.
“The Bank of Japan to some degree disappointed with its report today,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank (TD)’s TD Securities unit, said in a telephone interview. “There was some additional easing, but it was really just a shuffling of the deck. Markets were a bit disappointed that there was no new money involved.”
The yen gained 0.9 percent to 96.80 per euro at 5 p.m. New York time after appreciating earlier to 96.43, the strongest level since June 1. The Japanese currency advanced 0.6 percent to 79.31 per dollar. The euro weakened 0.3 percent to $1.2203 after sliding to as low as $1.2167.
Japan’s currency rose versus the dollar as the extra yield investors receive for investing in two-year U.S. Treasuries versus comparable Japanese government bonds fell to the lowest in a month, limiting dollar-denominated assets’ appeal. The yield spread was 16 basis points, or 0.16 percentage point.
The Canadian dollar reached a record high against the euro, C$1.2418, and reversed a slide against the greenback. The loonie, as the currency is nicknamed for the image of the bird on the C$1 coin, was up 0.1 percent to C$1.0191 to its U.S. counterpart after dropping earlier as much as 0.5 percent.
Crude oil for August delivery was little changed at $85.81 a barrel in New York after erasing declines as the U.S. was said to be readying additional sanctions against Iran. The Standard & Poor’s GSCI Index of 24 raw materials gained 0.4 percent after falling 1.1 percent earlier. Raw materials account for about half of Canada’s export revenue.
China’s economic growth slowed to an annual 7.7 percent last quarter, from 8.1 percent in the previous three months, a Bloomberg survey forecast before the data is released.
“We are seeing very significant negative signals being generated by leading indicators, suggesting that the global slowdown is continuing to gain momentum,” said Ian Stannard, chief European currency strategist at Morgan Stanley in London. “The yen and the dollar are both going to remain supported.”
Japan’s currency gained 6.4 percent in the past three months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 4 percent, while the euro dropped 3.7 percent.
The yen briefly erased its daily advance versus the dollar and euro after the Japanese central bank’s announcement.
The BOJ expanded its asset-purchase fund by 5 trillion yen ($63 billion) to 45 trillion yen and cut the size of a credit loan facility by the same amount to 25 trillion yen. It held its benchmark rate at between zero and 0.1 percent and left the maturity of government debt it buys unchanged at three years.
“The market decided what the BOJ was giving them with one hand, they were taking back with the other,” Citigroup’s Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York, said in a telephone interview. “So the net impact was very limited.”
The yen’s risk-adjusted gain of 0.38 percent against the dollar this year was the fourth-largest among major currencies, the Bloomberg Riskless Ranking showed. The euro was the worst performer on a straight-return basis, losing 5.8 percent.
The risk-adjusted return, which isn’t annualized, is calculated by dividing total return by volatility, or the degree of daily price variation, giving a measure of income per unit of risk. A higher volatility means the price of an asset can swing dramatically in a short period, increasing the potential for unexpected losses.
Sterling fell to its lowest level in five weeks versus the dollar on concern efforts to pull the U.K. out of its first double-dip recession since the 1970s will be hampered by the euro-area debt crisis and declining global growth. The pound depreciated 0.5 percent to $1.5428 after weakening earlier to $1.5394, the lowest since June 6.
Nomura Holdings Inc. lowered its forecast for the dollar versus the yen and the euro against the greenback, citing weak growth “dynamics” in the euro region. Nomura predicted the dollar will trade at 80 yen at the end of September, versus its previous forecast of 83 yen. It estimated the euro will trade at $1.18 at the end of September, compared with an earlier projection of $1.25.
“The politicians and policy makers in Europe can’t get a solution, and it’s very unlikely they’re going to between now and Christmas, so euro-dollar is heading lower,” Geoff Kendrick, head of European currency strategy at Nomura International in London, said on Bloomberg Television’s “The Pulse” with Guy Johnson. “The only question is, how fast does it go there?”
Barclays Plc is betting on Asian currencies instead of the euro even as Chinese economic growth eases to the slowest pace in three years. Fiscal stimulus from the Chinese government may be more beneficial than potential monetary stimulus from the European Central Bank, said Jose Wynne, head of North America foreign-exchange research for Barclays Capital in New York. Wynne spoke in a Bloomberg Television interview on “Lunch Money” with Sara Eisen.
Barclays forecasts the euro will depreciate to $1.15 in the next year.
The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trade partners, rose as much as 0.3 percent to 83.829, the highest level since July 2010, before trading at 83.644, up 0.1 percent.
Australia’s dollar was the among the biggest losers versus its U.S. counterpart after the statistics bureau said in Sydney the number of people employed in the country fell last month by 27,000, almost erasing a revised 27,800 job gain in May.
The Aussie dropped 1.1 percent to $1.0139 to the U.S. dollar after falling as much as 1.5 percent, the biggest intraday decline since June 21. The Australian currency slid 1.7 percent to 80.41 yen.
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