2011年8月23日火曜日

Euro Declines as Stocks Pare Gains; Yen Tumbles on Concern Japan Will Act - Bloomberg

The euro fell against the majority of its most-traded counterparts, erasing earlier advances, as stocks fluctuated, reducing demand for higher-yielding assets.

The yen slid from almost its postwar record high versus the dollar after Japanese Finance Minister Yoshihiko Noda said he’s ready to take decisive action to stem its strength. The dollar fell earlier amid bets Federal Reserve Chairman Ben S. Bernanke will signal at an Aug. 26 conference in Jackson Hole, Wyoming, the Fed will take further steps to boost the U.S. economy.

“Everyone is focusing on equities and taking their cues from that,” said Andrew Cox, a New-York based currency strategist at Citigroup Inc. “The euro has traded in a very tight range, and we don’t see a catalyst for that to change, at least before Friday.”

Europe’s 17-nation currency slipped 0.2 percent to $1.4374 at 3:05 p.m. in New York, from $1.4397 on Aug. 19. It earlier appreciated as much as 0.3 percent. The yen fell 0.3 percent to 76.74 per dollar, after reaching a post-World War II high of 75.95 Aug. 19. The Japanese currency declined 0.1 percent to 110.31 per euro.

Switzerland’s franc fell versus most major counterparts on speculation the country’s central bank will take move further to curb its gains. New Zealand’s dollar and Sweden’s krona gained against the euro, yen and franc.

The Standard & Poor’s 500 Index was up 0.2 percent after rising as much as 2 percent and falling 0.2 percent.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major trade partners, rose 0.1 percent to 74.072, from 74.009 on Aug. 19.

Bernanke’s scheduled appearance at the Kansas City Fed’s annual economic conference in Jackson Hole comes as U.S. manufacturing weakens, consumer confidence tumbles and the unemployment rate holds above 9 percent.

At last year’s event, he foreshadowed a second round of asset purchases under quantitative easing to improve the economy. The central bank bought $600 billion in Treasuries from November through June.

“Most of the focus today and probably this week is on what Bernanke will and won’t say on Friday,” said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. “Bernanke is likely to point to all the tools they have in their toolbox. If he does that, it might prove negative for the U.S. dollar.”

The euro also declined as German Chancellor Angela Merkel reiterated her opposition to issuing euro-area bonds as a way to help solve Europe’s sovereign debt crisis, saying yesterday she won’t let financial markets dictate policy.

Investor calls for euro bonds intensified last week as concern about the debt crisis and a slowing global economy drove down European stocks. The Stoxx Europe 600 dropped to 223.13 on Aug. 19, the least since July 2009.

The premium European banks pay to borrow in dollars through the swaps market increased in a sign lenders may be facing mounting pressure to raise funds in the U.S. currency. It last decreased on Aug. 15.

The cost of converting euro-based payments into dollars, as measured by the one-year cross-currency basis swap, fell one basis point, or 0.01 percentage point, to 49.5 basis points below the euro interbank offered rate, or Euribor, indicating a higher premium to buy the greenback. Basis swaps allow investors to borrow in one currency and simultaneously lend in another.

Japan’s Noda told reporters in Tokyo today he’s become “more concerned about the worsening of the yen’s one-sided movements.” The government will take “bold actions if necessary and won’t rule out any possible options,” he said.

Japan last intervened in the currency market, selling yen in an effort to halt its climb, on Aug. 4. That drove the currency down as much as 4.1 percent against the greenback. It has since appreciated 2.8 percent.

“We’ve had further comments by Noda and other Japanese officials indicating a lack of comfort with yen strength,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $26 trillion in assets under administration. “Renewed jawboning has contributed to yen weakness.”

The franc weakened amid speculation the Swiss National Bank will introduce new measures to damp demand for the nation’s currency. The SNB cut borrowing costs to zero earlier this month, increased bank sight deposits almost sevenfold and left the door open for additional measures.

The franc declined 0.5 percent to 1.1355 per euro and was 0.6 percent weaker at 79.01 centimes per dollar.

Most Swiss support intervention by their central bank to curb gains in the franc, the newspaper SonntagsZeitung reported yesterday. The newspaper also said, without naming sources, the Swiss Cabinet expects the SNB to set an exchange-rate target of at least 1.2 francs per euro.

SNB spokesman Walter Meier declined to comment on whether the central bank had intervened.

The franc advanced 10 percent developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen rose 4.9 percent and the dollar is down 2.1 percent.

The franc and yen tend to strengthen during periods of financial turmoil because their export-reliant economies don’t need foreign capital to balance current accounts, the broadest measure of trade.

New Zealand’s dollar strengthened 0.9 percent to 82.58 U.S. cents, and the Swedish krona appreciated 0.4 percent to 6.3630 per U.S. dollar.

To contact the reporter on this story: 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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