The yen and Swiss franc weakened against most of their major counterparts on evidence of recovery in the world’s largest economies, supporting demand for higher- yielding assets.
The euro advanced to a two-month high against the dollar after a report showed German consumer confidence will rise in August as economic growth accelerates. Figures tomorrow are forecast to show orders for U.S. durable goods rose last month. The Swiss franc fell to the lowest level in more than a month versus the euro as stocks in Europe and Asia advanced.
“We’re still in a tentative risk-on environment,” said John Hydeskov, a currency analyst at Danske Bank A/S in Copenhagen. “The yen won’t be much stronger than this, and it’s a good time to sell the currency.”
The yen depreciated 0.9 percent to 113.87 per euro at 7:23 a.m. in New York, from 112.89 yesterday, after reaching 113.91, the weakest level since June 3. The yen slid 0.6 percent to 87.41 per dollar, from 86.88. Japan’s currency will trade at 95 per dollar in six months, Hydeskov said. The dollar slid 0.2 percent to $1.3023 per euro, from $1.2994, after reaching $1.3037, the weakest level since May 10. The Swiss franc depreciated 1.1 percent to 1.3775 per euro, from 1.3625, after declining to 1.3781, the weakest since June 21.
The MSCI World Index of stocks advanced 0.3 percent. Futures on the Standard & Poor’s 500 Index rose 0.6 percent a day after the Dow Jones Industrial Average erased this year’s decline and advanced 1 percent.
European Bank Profit
UBS AG, Switzerland’s biggest bank, and Deutsche Bank AG, Germany’s largest, reported second-quarter profits that surpassed analysts’ estimates, driving the Stoxx Europe 600 Index up 0.7 percent.
Europe’s common currency tends to gain when stocks advance. The euro’s value versus the yen had a correlation of 0.9 with the MSCI World Index in the past four months, Bloomberg data show. A reading of 1 would mean the two moved in lockstep.
“The sell-off in the franc today is purely a function of increased risk appetite,” said Christian Lawrence, a foreign- exchange strategist at Royal Bank of Canada in London. “Risk is better, and we’re seeing shares gain across the board.”
A German consumer sentiment index based on a survey of 2,000 people will climb to 3.9 in August from a revised 3.6 this month, the Nuremberg-based market research company GfK AG said in a statement today. The median forecast of 25 estimates in a Bloomberg News survey was for the index to remain unchanged at July’s initial reading of 3.5.
U.S. durable-goods orders gained 1 percent in June after falling a revised 0.6 percent in the previous month, a Bloomberg survey showed before the data’s release.
Plosser on Stimulus
Federal Reserve Bank of Philadelphia President Charles Plosser said it’s too soon for the central bank to bolster record U.S. monetary stimulus in response to slower-than- forecast gains in economic growth and employment.
“Talk of new efforts to stimulate the economy are premature right now,” Plosser said yesterday in an interview with Bloomberg News in Washington. “I don’t think the data have been sufficiently compelling one way or another.”
Australia’s dollar held above 90 U.S. cents and New Zealand’s was near its strongest level since January on expectations both economies are gaining momentum.
Australia’s statistics bureau is forecast to report tomorrow that consumer prices increased in the second quarter at the quickest pace since September 2009. New Zealand’s central bank will raise borrowing costs on July 29, according to a Bloomberg survey of economists.
“The risk to the Australian and New Zealand dollars is for further strength in the short term,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Wednesday’s CPI looks to be very important in shaping expectations for future RBA policy.”
Australia’s dollar advanced 0.3 percent to 90.49 U.S. cents after reaching 90.65 cents, the highest level since May 10. New Zealand’s dollar gained 0.4 percent to 73.67 cents after reaching 73.75, the highest level since Jan. 19.
New Zealand’s annual trade balance widened to NZ$729.5 million ($536 million) in the 12 months ended June 30, from a NZ$91 million surplus in the year through May, economists forecast before the statistics bureau’s report on July 29.
Japan’s large manufacturers expect the yen to average 90.16 against the dollar in the six months to March 2011, according to the Bank of Japan’s Tankan survey released July 1.
Nomura Holdings Inc. cut forecasts for the dollar against the yen, citing a slowing U.S. economy and expectations the Fed won’t raise interest rates until the first half of 2011.
The firm expects the dollar to trade at 90 yen by the third quarter of this year compared with 95 yen previously, it said in a research note dated yesterday. The greenback will finish 2010 at 87.5 yen compared with an earlier estimate of 97 yen.
The euro has dropped 7.9 percent this year, the biggest loss among developed-world currencies, according to Bloomberg Correlation-Weighted Indices. The dollar is up 2.5 percent, and the yen has advanced 11 percent.