The Japanese currency headed for its biggest monthly drop in a year versus the euro before a report tomorrow that may indicate confidence among Japan’s large manufacturers increased, boosting appetite for investments in countries with higher long- term interest rates. The franc climbed to a record against the euro as Swiss leading economic indicators rose in March to the highest level since November 2007.
“There’s a tremendous amount of pressure to push the yen lower in the next few days,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. “The market is expecting Japanese institutional investors to be chasing steepness in yield curves globally in relatively safe places.”
The yen depreciated 1.6 percent to 126.40 per euro at 2:01 p.m. in New York, from 124.44 yesterday, after touching 126.56, the weakest level since Feb. 3. It dropped 0.7 percent to 93.39 per dollar, from 92.76, after reaching 93.63, the weakest since Jan. 8. The euro climbed 0.9 percent to $1.3533, from $1.3414.
U.S. 10-year note yields have climbed 63 basis points, or 0.63 percentage point, to 3.82 percent since the end of November. Yields on comparable Japanese securities rose 14 basis points to 1.395 percent.
The Swiss franc gained as much as 0.7 percent to 1.4209 per euro, the strongest since the 16-nation currency’s 1999 debut, before trading at 1.4231, up 0.5 percent. It strengthened 4.2 percent for the quarter.
Monthly Loss
The Japanese currency was poised for a 4.2 percent loss versus the euro this month, the biggest since it tumbled 5.7 percent in March 2009. The yen headed for a 4.8 percent drop against the greenback, its biggest monthly decline this year.
The losses accelerated in New York trading as Japan’s fiscal year ended today, encouraging traders to place fresh bets on yen weakness on speculation Japanese companies had finished sending earnings back home. The yen fell the most this month against the euro among 16 major counterparts, exceeding the 0.3 percent drop of the Swedish krona, the second-worst performer, by more than 10 times.
“The fear was that heading into this fiscal year-end there would have be a significant potential for a pickup in repatriation of earnings back to Japan,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “If those flows have materialized, it’s had very little supportive impact on the yen.”
Yen Outlook
Japan’s currency will probably fall 2.7 percent to 96 versus the dollar in the next six months as the Bank of Japan continues stimulating the economy, Hardman predicted. The Federal Reserve said on March 16 it would stop purchasing mortgage debt this month.
The yen briefly pared losses against the dollar and euro earlier today after a report showed companies in the U.S. unexpectedly cut payrolls in March. The 23,000-position decline shown by data from ADP Employer Services compared with a gain of 40,000 forecast in a Bloomberg News survey.
Today’s advance by the euro reduced its loss against the dollar in the first quarter to 5.5 percent. The drop, on concern Greece’s debt crisis will derail the region’s economic recovery, would still be the worst performance since an 11 percent decrease in the three months ended September 2008.
U.S. Rate Bets
Futures on the CME Group Inc. exchange showed a 56 percent chance the Fed will raise its target rate for overnight lending between banks by at least a quarter-percentage point by its November meeting, compared with 48 percent odds a month ago. The central bank has kept the target interest rate in a range of zero to 0.25 percent since December 2008.
The U.S. Labor Department’s nonfarm jobs report on April 2 is forecast to show employers added 184,000 positions, the most in three years, a Bloomberg survey of 81 economists shows.
Australia’s dollar fell for the first time in three days, dropping as much as 0.7 percent to 91.31 U.S. cents. The Bureau of Statistics said the nation’s retail sales tumbled 1.4 percent in February. Economists in a Bloomberg News survey forecast a 0.3 percent increase.
“That was a very awful set of retail sales numbers with broad-based losses,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong.
The Aussie has climbed 2.3 percent against the greenback this quarter after Reserve Bank of Australia Governor Glenn Stevens raised the benchmark cash target in March to 4 percent.
The U.S. dollar’s share of global currency reserves rose to 62.1 percent in the fourth quarter of 2009, and the euro’s share dropped to 27.4 percent, the International Monetary Fund said today in a quarterly report.
The yen’s share dropped to 3 percent from 3.2 percent and the British pound held at 4.3 percent in the period ended Dec. 31, the Washington-based fund said.
