Bloomberg News

Yen Rises on Greece, U.S. Uncertainty; Aussie Advances

November 06, 2012

The yen rose against the euro for a third day, as investors sought the currency as a haven amid concern Greece will struggle to win bailout funds and before the U.S. presidential election today.

The Japanese currency strengthened against all but one of its 16 major peers ahead of data that may add to signs the sovereign-debt crisis is hurting Europe’s economic growth. The Australian dollar climbed to the highest in five weeks after the Reserve Bank unexpectedly left interest rates unchanged.

“Greece would struggle to receive aid should the austerity measures fail to be approved by parliament,” said Masakazu Sato, a Tokyo-based foreign-exchange adviser at Gaitame Online Co. “The yen may be bought in a bid for safety as attention shifts back to Greece.”

The yen gained 0.3 percent to 102.42 per euro at 9:04 a.m. London time, after having risen 0.9 percent in the last two sessions. It strengthened 0.3 percent to 80.13 per dollar at 8:14 a.m. London time, after touching 79.96.

The euro was little changed at $1.2776, after reaching $1.2767 yesterday, the weakest since Sept. 11.

As Greece seeks a 31 billion-euro tranche of its bailout package this month, Prime Minister Antonis Samaras is facing down a revolt in his three-party coalition. The leader of the Democratic Left reiterated Nov. 4 his party’s opposition to changes in the labor law demanded by international creditors. While no date has been set for a vote on that bill, it may come as soon as tomorrow. The budget vote is slated for Nov. 11.

Economic Slump

Spain said yesterday it is working on a review of income and spending in its welfare system as it heads toward a deficit. The country is relying on European aid for its banks and potentially seeking more to shore up its public finances.

Klaus Regling, managing director of the European Stability Mechanism rescue fund, said yesterday the 17-nation euro area needs more time to overcome the Greece-triggered troubles because the region is experiencing its “most severe crisis in 80 years.”

The final reading on a composite index measuring euro-area services and manufacturing was at the lowest in more than three years and unchanged from preliminary data on Oct. 24, according to the median of analyst estimates compiled by Bloomberg News before the report today.

German Data

German factory orders declined 0.4 percent in September from the previous month, a economist separate survey shows.

The euro weakened for a fifth day against a basket of nine developed-nation currencies, according to Bloomberg Correlation- Weighted Indexes.

“The euro is being sold as the market focuses on the risks surrounding Greece and Spain,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “German data have been weakening and there are concerns the country may fall into a recession. You can’t buy the euro in the current environment.”

Ishikawa said the shared currency this week may decline to $1.2739, near the 38.2 percent retracement of its rise from the July 24 low to the Sept. 17 high, citing Fibonacci analysis. The analysis method is based on the theory that prices rise or fall by certain percentages after reaching a new high or a low. The level was last reached on Sept. 7.

“The euro has broken the $1.28 level after falling below its 200-day moving average and technical indicators are suggesting further declines,” he said.

U.S. Election

The dollar weakened against the yen as the extra yield two- year U.S. Treasuries offered over the same maturity Japanese government bonds narrowed. The spread was 17 basis points yesterday, the least since Oct. 16.

Americans vote today, with the national poll conducted by the Pew Research Center Oct. 31-Nov. 3 showing President Barack Obama leading Republican challenger Mitt Romney 48 percent to 45 percent. The survey showed them tied at 47 percent a week ago. The final tracking poll by ABC News and the Washington Post had Obama taking a lead of 50 percent to 47 percent in a survey of 2,345 likely voters conducted Nov. 1-4. The margin of error was plus or minus 2.5 percentage points.

Fed Chairman Ben S. Bernanke and his colleagues on the Federal Open Market Committee last month affirmed the decision in September to buy $40 billion of mortgage-backed securities each month without specifying the total size or duration of the purchases. Romney has said he wouldn’t appoint Bernanke to a third term.

Weaker Dollar

“Obama is looking like he will be re-elected and with the market expecting the Fed to maintain its current easy monetary policy under him, the dollar may weaken,” said Gaitame Online’s Sato.

The so-called Aussie climbed after Reserve Bank of Australia Governor Glenn Stevens and his board left the overnight cash-rate target at 3.25 percent. Seven of 27 economists surveyed by Bloomberg predicted the decision, with the other 20 seeing a cut to 3 percent.

“The RBA was expected to potentially cut rates today and they didn’t,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “As a result the Aussie dollar rallied.”

Australia’s currency touched $1.0438, the highest since Sept. 28, before trading at $1.0425, 0.6 percent above yesterday’s close. It advanced 0.4 percent to 83.57 yen.

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net.

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net


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