Yen Falls for Eighth Day After Exports Slump; Euro Gains

The yen dropped for an eighth day against the dollar, the longest streak in seven years, as a report showing Japan’s exports fell the most since the 2011 earthquake fueled bets the central bank will add more stimulus.

The euro rose versus most major currencies after Spanish Prime Minister Mariano Rajoy extended an electoral majority in his home region of Galicia. It remained higher after Moody’s Investors Service downgraded five Spanish regions. The yen slid versus all of its 16 most-traded peers after Japan’s economy minister, Seiji Maehara, pressed the central bank yesterday for more stimulus and as yields on U.S. Treasury two-year notes rose the most since June versus their Japanese counterparts.

“You had weak trade numbers, Treasury yields are higher, and there’s speculation that the Bank of Japan (8301) is going to need to come with more stimulus,” Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York, said in a telephone interview. “There are a lot of factors that are weighing on the yen.”

Japan’s currency depreciated 0.8 percent to 79.94 per dollar at 5 p.m. New York time after dropping earlier to 79.96, the weakest level since July 6. The yen slid 1.1 percent to 104.41 per euro and touched 104.46, the weakest since May. The euro strengthened 0.3 percent to $1.3060 after falling 0.7 percent over the previous two trading days.

Treasury two-year notes yielded 0.31 percent, 21 basis points more than Japanese two-year government debt, making the U.S. securities more attractive to Asian buyers. A basis point is 0.01 percentage point.

Rupee Strengthens

India’s rupee climbed 0.7 percent against the dollar, the most among an extended list of 31 major counterparts, before an auction of bond-purchase permits to overseas investors that may increase inflows to the nation’s fixed-income market. It traded at 53.4762 to the greenback. Russia’s ruble lost the most among all of the currencies except the yen, dropping 0.7 percent to 31.115 per dollar.

Australia’s dollar weakened versus most major peers before a report this week that may show inflation held near the slowest in 13 years, providing scope for the country’s central bank to cut interest rates. The Aussie depreciated 0.1 percent to $1.0320. It rose 0.7 percent to 82.50 yen.

New Zealand’s dollar advanced 0.3 percent to 81.77 U.S. cents and climbed 1.1 percent to 65.37 yen.

The rand rose for the first time in three days against the greenback as foreign investors resumed purchases of South Africa’s bonds. Prospects of an interest-rate cut fell after retail sales grew more than expected in August.

The South African currency gained as much as 0.7 percent to 8.5971 per dollar before trading at 8.6418, up 0.2 percent.

Low Volatility

Implied volatility among Group of Seven currencies, which signals the expected pace of price swings, touched 7.54 percent, almost a five-year low, a JPMorgan Chase & Co. index showed. The gauge fell to 7.47 percent a week ago, the lowest since October 2007. Lower volatility makes investments in currencies with higher benchmark lending rates more attractive because the risk in such trades is that market moves will erase profit. The index’s average over the past five years is 12.4 percent.

Japanese exports slid 10.3 percent in September from a year earlier, leaving a trade deficit of 558.6 billion yen ($7 billion), the Finance Ministry said in Tokyo. The decrease was the most since May 2011, two months after a magnitude-9 quake struck northeastern Japan.

‘Real Problem’

“The slide in exports is a real problem for Japan,” Jeremy Stretch, executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London, said in an interview on Bloomberg Television’s “Lunch Money” with Deirdre Bolton. “We’ve been maintaining a short bias in the yen for the last couple of weeks. It maintains the case that you should probably be short yen until the BOJ meeting.” Short positions are bets a currency will weaken.

The BOJ announces its next policy decision on Oct. 30 and will also issue its revised economic projections for the 2012 and 2013 fiscal years and its first set of forecasts for 2014. After the Federal Reserve announced open-ended bond purchases last month to spur U.S. economic growth, its Japanese counterpart responded by expanding its asset-buying program by 10 trillion yen on Sept. 19.

“The deterioration in the export figures caught the market’s attention and pretty much accelerated the expectation that the central bank may do something fairly soon,” Sireen Harajli, a foreign-exchange strategist in New York at Credit Agricole SA (ACA), said in a phone interview.

Canada, Mexico

More stimulus from the American central bank will probably benefit the Mexican and Canadian currencies, according to Sebastian Galy, a senior foreign-exchange strategist at Societe Generale SA in New York. The U.S. is the biggest trading partner of both countries.

“It will probably be the case that we continue to see the dollar weaken against the Canadian dollar and the Mexican peso,” Galy said in an interview on Bloomberg Radio’s “Bloomberg - The First Word” with Ken Prewitt. “These are economies which will benefit from activity from the Fed and the steady rebalancing of the U.S. economy.”

The loonie, as Canada’s currency is nicknamed, gained 0.1 percent to 99.24 cents per U.S. dollar. It appreciated 2.1 percent versus the dollar in the past three months. The peso, which rose 0.2 percent to 12.8582, strengthened 3.9 percent.

The greenback may gain more than 5 percent against the yen after the U.S. currency exceeded its 200-day moving average, Morgan Stanley analysts said, citing trading patterns. The average was 79.44 yen, according to data compiled by Bloomberg.

Relative Strength

Another technical indicator showed the yen may be poised to strengthen against the dollar and euro. The 14-day relative- strength index for the Japanese currency versus the greenback increased to 73.5, and the gauge for the yen versus the euro rose to 70.8. Readings of more than 70 may indicate an asset has moved too far, too quickly and may be due for a correction.

Moody’s cut the credit ratings of five Spanish provinces, citing fundamental economic and financial weaknesses, according to a statement. It confirmed the ratings of five other provinces.

The euro gained earlier for the first time in three days against the dollar after Spanish Prime Minister Mariano Rajoy extended an electoral majority in his home region of Galicia. Rajoy’s People’s Party won 41 of the 75 seats in the regional assembly in Galicia, vindicating Spain’s austerity program and extending the party’s majority in the northwestern region.

Leaders at a European Union summit in Brussels last week committed to agreeing by year-end on a legislative framework for a single bank supervisory mechanism, a deal Moody’s Investors Service said is negative for credit ratings of weaker nations.

To contact the reporters on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net; Joseph Ciolli in New York at jciolli@bloomberg.net

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.