Yen Gains as Current-Account Surplus Boosts Haven

(Corrects to remove reference that franc breached euro cap in second paragraph.)

The yen gained versus most of its major counterparts as Japan returned to a current-account surplus, bolstering the currency as a refuge amid concern the global economic recovery is slowing.

The euro touched a one-month low versus the yen before German data tomorrow that may show exports fell in February. The dollar weakened against the yen after a U.S. report said last week that employers added fewer jobs than forecast. Japan’s currency gained after China’s inflation rose more than forecast.

“China’s CPI was slightly higher than expected, and higher inflation may constrain the authorities’ ability to offset economic weakness with fiscal stimulus,” said Mary Nicola, a currency strategist at BNP Paribas SA in New York. “The way the market reacted on Friday, after we got the payrolls number, indicated that maybe there’s some global growth concern.”

The yen appreciated 0.2 percent to 106.65 per euro at 12:32 p.m. New York time after touching 106.12, the strongest level since March 7. Japan’s currency gained 0.3 percent to 81.38 per dollar after reaching 81.20, the strongest since March 8. The euro was little changed at $1.3102 after falling to $1.3033, the weakest since March 15. Markets in Australia, New Zealand and the U.K. are closed today for a public holiday.

Implied volatility on three-month options on Group of Seven nations’ currencies fell to 10.19 percent after closing as high as 10.33 percent last week, according to a JPMorgan Chase & Co. index. The measure has averaged 10.37 percent this year.

Stocks and commodities slid, with the Standard & Poor’s 500 Index (SPX) dropping 1.1 percent and the Thomson Reuters/Jefferies CRB Index of raw materials falling 0.7 percent.

Swiss Franc

The franc traded at 1.20146 per euro. The Swiss National Bank set the 1.20 limit on Sept. 6. The SNB won’t allow the franc to rise above the ceiling and is ready to buy foreign currencies in “unlimited quantities,” spokesman Walter Meier said April 5.

“We believe the SNB is serious in its commitment to maintain the floor and will aggressively defend it,” Yuki Sakasai and Aroop Chatterjee, currency strategists at Barclays Plc, wrote in a research note April 6. The Swiss franc is “an attractive funding currency for risky asset positions.”

Current-Account Surplus

The yen rose as Japan reported a 1.18 trillion yen ($14.5 billion) surplus in its February current account, the widest measure of trade. That was after a record deficit in the January account and compared with the surplus of 1.12 trillion yen forecast by economists.

Japan’s currency tends to strengthen during global economic turmoil because Japan’s current-account surplus makes it less reliant on foreign capital.

Norway’s krone and South Korea’s were among the biggest losers against the yen among its 16 most-traded peers tracked by Bloomberg.

Consumer prices in China rose 3.6 percent from a year earlier, the National Bureau of Statistics said today. That was more than the median 3.4 percent estimate in a Bloomberg News survey of 33 economists. Food-related costs gained 7.5 percent.

Premier Wen Jiabao may need to remain alert to the risk of inflation bouncing back even after price increases stayed below the government’s 4 percent target for a second month. China’s economy may have expanded last quarter at the slowest pace in almost three years, showing the limits of the nation’s contribution to global growth.

The krone dropped 0.3 percent to 14.0562 yen, and the won fell 1 percent to 7.15 yen.

Korea Tension

South Korea warned that North Korea may test a nuclear weapon after a planned missile launch this month that is already raising regional tensions the most since Kim Jong Un in December succeeded his father as head of the totalitarian state.

Canada’s dollar touched a one-month low against Japan’s currency, falling to 81.25 yen, and was little changed at 99.67 cents per U.S. dollar.

The yen gained 1.7 percent against nine developed-nation counterparts in the past month, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar rose 0.2 percent and the euro was little changed. The Australian dollar lost the most, falling 2.5 percent.

Exports from Germany, the euro area’s biggest economy, probably decreased 1.2 percent in February from the prior month, a Bloomberg News survey of economists showed before the report due tomorrow.

“The European economy is weak,” said Kumiko Gervaise, an analyst in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest online currency margin-trading company. “The German economy is getting weaker than before. Bad data from Germany may contribute to euro weakness.”

U.S. Inflation

U.S. consumer prices advanced 0.3 percent last month after increasing 0.4 percent in February, according to a Bloomberg News survey before the Labor Department’s April 13 release. Nonfarm payrolls increased by 120,000 in March, the smallest gain in five months, the Labor Department reported April 6.

The Federal Reserve has pledged to keep its target lending rate at a record low range of zero to 0.25 percent through 2014. It will hold off on increasing monetary accommodation unless the U.S. economic expansion falters or prices rise at a rate slower than its target, according to minutes of the central bank’s March 13 meeting released last week.

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net

To contact the editor responsible for this story: Paul Cox at Pcox16@bloomberg.net

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