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Dollar Drops Versus Yen as Unemployment Claims Rise, Treasury Yields Fall

The dollar dropped the most in seven trading days against the yen as initial unemployment-benefit claims rose more than estimated last week and yields on U.S. Treasuries fell.

The Swiss franc gained versus 15 of its 16 most-traded counterparts and the yen rose against most as Iranian state-run television said the nation will send two warships through the Suez Canal, adding to the currencies’ refuge appeal. The South African rand was the best performer against the dollar, gaining to the highest level in more than a week as commodities rallied.

“The Swiss franc, gold and oil have all rallied on the news about Iran possibly in the Suez Canal, and those will reverse as that is resolved,” Brian Dolan, chief strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “You have a decent pullback in dollar-yen today.”

The dollar weakened 0.4 percent to 83.31 yen at 5 p.m. in New York, from 83.68 yen yesterday. It fell earlier as much as 0.6 percent, the biggest intraday drop since Feb. 8. The greenback depreciated 0.3 percent versus the euro to $1.3609. The yen gained 0.2 percent to 113.37 per euro, from 113.55.

The greenback slid against all of its major peers as two- year Treasury yields reached the lowest level in more than a week, damping the appeal of dollar-denominated assets.

The yields fell as much as six basis points, or 0.06 percentage point, to 0.76 percent, the lowest intraday level since Feb 8. Ten-year note yields decreased as much as seven basis points to 3.55 percent, the lowest since Feb. 4.

Jobless Claims

“Yields in the U.S. are driving dollar-yen lower, and Treasury yields are reacting to the jobless data that came in higher than expected,” said New York-based Paresh Upadhyaya, head of Americas Group-of-10 currency strategy at Bank of America Corp.

Applications for unemployment benefits rose to 410,000 in the week ended Feb. 12, exceeding the 400,000 median forecast in a Bloomberg News survey, Labor Department figures showed today in Washington.

The U.S. consumer price index increased 0.4 percent for a second month, exceeding the 0.3 percent median estimate of economists surveyed by Bloomberg, another Labor Department report showed.

Japan’s currency strengthened after failing to breach the 84-yen-per-dollar level yesterday for the first time since Dec. 20, FOREX.com’s Dolan said. The yen reached 83.98 yesterday.

“We need to see a back-up in U.S. rates for the dollar to reverse that,” Dolan said.

Benchmark U.S. Rate

The Federal Reserve has held its key interest rate at zero to 0.25 percent since December 2008 to spur the economy. It is also buying $600 billion of Treasuries in its latest round of a stimulus tactic called quantitative easing.

The yen has fallen 3.9 percent this year in a measure of 10 developed-nation currencies, according to Bloomberg Correlation- Weighted Currency Indexes. The dollar has lost 1 percent, and the euro has gained 0.8 percent.

Switzerland’s currency climbed 1 percent versus the dollar today, to 94.97 centimes and touched 94.78, the strongest level since Feb. 4. It gained 0.7 percent to 1.2925 per euro and reached 1.29, the also strongest since Feb. 4.

Iranian Warships

The franc matched yesterday’s 1.2 percent intraday gain against the dollar, the biggest jump since Dec. 28, as Iranian state-run Press TV quoted an unidentified naval official as confirming reports the warships plan to transit the canal.

The Suez Canal Authority’s head of traffic, Ahmed El Manakhly, said in a phone interview no Iranian naval vessels have been licensed to pass. The Associated Press reported that the ships withdrew today a request to use the facility. It quoted an unnamed official it said was not authorized to speak to the media.

The Swiss currency rose for a fourth day against the dollar and euro as speculation that unrest will keep spreading through the Middle East damped investor appetite for riskier assets.

Bahrain’s army took control of large parts of the capital, Manama, after five people were killed in clashes between pro- democracy protesters and police. Protests in Yemen and Libya also have broken out in the past week.

South Africa’s rand jumped 1.3 percent to 7.1644 per dollar, the strongest since Feb. 8, as the Thomson Reuters/Jefferies CRB Index of raw materials rose 0.9 percent.

Crude oil for March delivery increased 1.7 percent to $86.47 a barrel in New York amid concern Mideast turmoil will disrupt supply lines. Earlier it fell 0.7 percent.

Colombia’s peso rose the most in a month as a decline in the nation’s debt bolstered demand from buyers who sold dollars to buy the securities. The yield on Colombia’s benchmark 11 percent bonds due July 2020 touched 8.32 percent, its highest intraday level since April.

The currency gained for the first time in five days, climbing 0.9 percent to 1,893.75 per U.S. dollar. That’s its biggest jump on a closing basis since Jan. 18.

To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net;

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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