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Dollar Drops Against Yen as Data Fuel Concern That Recovery Is Faltering
The dollar fell for a second week against the yen after reports showed the recovery in the world’s largest economy may be faltering, boosting the Japanese currency’s attraction as a refuge.
The yen touched a 15-year high this week as purchases of existing homes in the U.S. tumbled twice as much as forecast, new-home sales unexpectedly fell and durable-goods orders rose less than anticipated. The Swiss franc, another haven currency, also gained. A government report next week may show the economy shed jobs in August for a third straight month.
“The U.S. economic recovery is clearly on shaky ground,” said Boris Schlossberg, director of research at online currency trader GFT Forex in New York. “Next week the market is going to be very focused to see how we stand.”
The greenback fell 0.5 percent to 85.22 yen in New York, from 85.62 yen in the week ended Aug. 20. It touched 83.60 yen on Aug. 24, its weakest level since 1995, and was headed for a 1.4 percent loss for the month. The dollar lost 0.4 percent to $1.2763 per euro, from $1.2712 a week earlier. The Japanese currency rose 0.1 percent to 108.72 per euro, from 108.83. The franc ended the week up 0.2 percent to 1.3119 per euro, after touching a record high 1.2972 on Aug. 25.
Several currencies that traditionally benefit from global growth climbed for the week after posting gains yesterday as stocks surged. The Swedish krona advanced against all of its 16 most-traded counterparts, followed by the New Zealand dollar. The krona rose 1.1 percent to 7.3391 per U.S. dollar, while the New Zealand currency gained 0.6 percent to 71.09 U.S. cents. The Australian dollar was the No. 4 performer, just below the franc, strengthening 0.6 percent to 89.89 U.S. cents.
Advance Pared
The Japanese currency trimmed its weekly advance yesterday when it tumbled after Federal Reserve Chairman Ben S. Bernanke pledged the central bank will safeguard the economic recovery and a report showed U.S. economic growth slowed less than forecast in the second quarter. The Standard & Poor’s 500 Index rose 1.7 percent, the most in more than three weeks.
The yen also weakened as Prime Minister Naoto Kan said Japan is willing to take “bold” action to lower its value. The yen has surged 14 percent this year in the biggest gain among developed-world counterparts, according to Bloomberg Correlation-Weighted Currency Indices. Central banks intervene in foreign-exchange markets by buying or selling currencies to influence exchange rates.
Japan last intervened in March 2004, when the yen was at about 109 per dollar. The Bank of Japan sold 14.8 trillion yen in the first three months of 2004, after record sales of 20.4 trillion yen in 2003. The currency ended the year at 102.63 to the dollar. Japan last bought the currency in 1998.
‘Willing to Intervene’
The yen fell yesterday against all of its most-traded counterparts.
“In the short term, the market doesn’t want to bet openly against the Bank of Japan because it has proved that it’s willing to intervene by its own,” said Stephan Maier, a foreign-exchange strategist at UniCredit SpA in Milan.
Bernanke said the Fed “will do all that it can” to ensure a continuation of the economic recovery. He spoke to central bankers from around the world at the Kansas City Fed’s annual monetary symposium in Jackson Hole, Wyoming.
Growth during the past year has been “too slow” and unemployment “too high,” Bernanke said. Still, a handoff from fiscal stimulus and inventory re-stocking to consumer spending and business investment “appears to be under way,” he said.
‘Dodged Two Bullets’
U.S. gross domestic product expanded at a revised annual pace of 1.6 percent from April through June, more than the 1.4 percent median forecast of economists in a Bloomberg News survey, Commerce Department data showed yesterday. The initial estimate last month was a rate of 2.4 percent. The economy grew at a 3.7 percent pace in the first quarter.
“The dollar really dodged two bullets,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency-exchange network. “The U.S. growth revision for the second quarter, that came out a touch higher than expected, which helped alleviate some of the deep-rooted concerns about the U.S. economy.” Bernanke’s remarks, “since he didn’t suggest that further stimulus was on the way for the U.S. economy, lent support to the dollar as well,” he said.
U.S. employers eliminated 100,000 jobs in August, according to the median forecast of 59 economists in a Bloomberg survey before the Labor Department reports the data on Sept. 3. Employers cut 131,000 positions the previous month and 221,000 in June.
“The fears of a U.S. economic slowdown are not going to go away,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York.
Purchases of existing homes plunged by a record 27.2 percent in July, the National Association of Realtors reported Aug. 24. Sales new homes fell to an annual pace of 276,000, the weakest since data began in 1963, Commerce Department figures showed the next day. Durable goods orders gained 0.3 percent last month, Commerce said on Aug. 25, compared with a 3 percent forecast in a Bloomberg survey.
To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net
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