Yen Rises After Pakistan Bombing; Euro Advances on German Growth Surprise

The yen strengthened against most of its 16 major counterparts after a bombing in Pakistan killed at least 73 people, boosting demand for Japan’s currency as a refuge.

The euro surged after data showed German economic growth accelerated more than forecast in the first quarter. South Korea’s won dropped to a three-week low after the central bank unexpectedly held off from increasing interest rates.

“The yen has substantial status as a safe haven,” said Adam Cole, global head of currency strategy at Royal Bank of Canada in London. “It’s clearly helped by a market which is turning more risk-averse.”

The yen advanced 0.5 percent to 80.50 per dollar at 9 a.m. in London. The Japanese currency was little changed at 115.23 per euro after reaching 114.19 yesterday, the strongest since March 28. The euro rose 0.4 percent to $1.4302. It appreciated to $1.4124 yesterday, the highest level since April 1.

Bombers today targeted 15 buses carrying newly graduated members of Pakistan’s Frontier Constabulary, a paramilitary force, who were going home after a May 11 ceremony, said Ghufran Ali, a police official in Charsadda. Sixty-six of the dead are from the force, he said. The Tehreek-e-Taliban group said it carried out the attacks as a first act of revenge for Osama bin Laden’s death, Pakistan’s Dunya TV reported.

German Growth

The euro erased its loss against the dollar after strong German growth added to the case for further interest rate increases by the European Central Bank.

Gross domestic product, adjusted for seasonal effects, jumped 1.5 percent from the fourth quarter, when it rose 0.4 percent, the Federal Statistics Office in Wiesbaden said today. Economists had forecast growth of 0.9 percent, according to the median of 30 estimates in a Bloomberg News survey.

“Economic fundamentals in Europe are resilient,” said Kengo Suzuki, manager of the foreign bond department in Tokyo at Mizuho Securities Co. “It supports expectations for a series of interest-rate increases.”

The won dropped after the Bank of Korea kept its benchmark rate at 3 percent, having increased it twice this year to help tame inflation. Two of 14 economists surveyed by Bloomberg forecast the decision, while 12 predicted a 25-basis-point increase.

“Expectations for a rate increase had been limiting declines in the won this week,” said Yun Se Min, a currency dealer at Busan Bank in Seoul.

The won lost 0.2 percent to 1,086.80 per dollar. It earlier touched 1,092.38, the weakest level since April 19.

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net. Monami Yui in Tokyo at myui1@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.