Dollar, Yen Strengthen as Risk Appetite Decreases; Euro Declines

The dollar and the yen gained versus most major counterparts as companies reported financial results that missed analyst estimates, adding to evidence the global economy is slowing and sapping risk appetite.

Higher-yielding currencies including the New Zealand dollar weakened as global stocks and commodities dropped. Canada’s dollar rose versus most peers as the central bank signaled it may raise interest rates, while Brazil’s real fell versus the dollar as its central bank intervened. The euro slid from a five-month high versus the yen after French industrial confidence dropped to the lowest level since 2009.

“In the U.S., earnings have been disappointing, especially in sectors which have been the brighter spots, like technology,” Aroop Chatterjee, a currency strategist at Barclays Plc in New York, said in an interview. “In periods of uncertainty, safe-haven currencies win out, with the usual suspects, the yen and the dollar, seeing some buying.”

The dollar advanced 0.6 percent to $1.2987 per euro at 5 p.m. New York time. It touched $1.2952, the strongest level in a week. The yen gained 0.7 percent to 103.69 to the 17-nation currency after depreciating earlier to 104.59, its weakest level since May 4. The Japanese currency appreciated 0.1 percent to 79.85 per dollar after slipping earlier to 80.01, the weakest since July 6.

Manufacturing Gauge

The Dollar Index (DXY) rose 0.3 percent to 79.911 as the Federal Reserve Bank of Richmond’s manufacturing index for October expectedly fell. The reading was negative 7, versus a forecast of 5 in a Bloomberg News survey of economists. Intercontinental Exchange Inc. uses the Dollar Index to track the greenback against the currencies of six major U.S. trade partners.

The yen typically strengthens in times of financial and economic turmoil because Japan’s historical trade surplus means the nation doesn’t have to rely on overseas lenders. The dollar benefits as a haven as the world’s main reserve currency.

“The market does not like uncertainty -- you want to know what you’re dealing with and not be guessing your way along,” said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. (8411) in New York. “The market has enjoyed a little bit of risk-on, and that’s changing.”

The euro rose 1.3 percent over the past month against nine developed-nation counterparts tracked by Bloomberg Correlation- Weighted Indexes. Norway’s krone gained 1.2 percent, while the yen dropped 2 percent.

Krone, Kiwi

The krone dropped 1 percent today to 5.7276 to the dollar as investors sought refuge. New Zealand’s dollar, nicknamed the kiwi, declined 0.8 percent to 81.16 U.S. cents and reached 81.01 cents, the lowest since Sept. 11.

The Standard & Poor’s 500 Index lost 1.4 percent, and the MSCI World Index dropped 1.6 percent. Of the 145 S&P 500 Index members to have reported financial results, 60 percent missed analysts’ revenue estimates, according to data compiled by Bloomberg. Google Inc. and Microsoft Corp. reported worse-than- forecast financial results last week.

The S&P GSCI Index of 24 raw materials sank 1.4 percent.

“We need to be cautious; central banks around the world are actively implementing monetary stimulus,” Derek Halpenny, the European head of global-markets research at Bank of Tokyo- Mitsubishi UFJ Ltd. in London, said in an interview on Bloomberg Television’s “Lunch Money” with Sara Eisen. “In that sense, I wouldn’t be positioning for any kind of major risk-off.”

Brazil’s Real

The Brazilian currency declined from the two-week high it reached yesterday against the greenback after the central bank auctioned reverse currency swaps to support exporters by preventing appreciation. The real weakened 0.2 percent to 2.0272 per U.S. dollar after gaining to 2.0237 yesterday. The central bank said today it auctioned 33,000 reverse currency swaps contracts out of 60,000 offered.

Canada’s dollar erased an earlier loss against the euro and appreciated 0.5 percent to C$1.2888. It was little changed at 99.24 cents to the greenback after sliding earlier to 99.76 cents, the weakest level since Aug. 8.

The Bank of Canada strengthened its bias for raising interest rates, retaining its outlier status among the Group of Seven nations. It signaled it may seek to curb record household debt levels by boosting rates for the first time in more than two years. The bank held its benchmark rate at 1 percent, as forecast by all 26 economists in a Bloomberg survey.

South Africa’s rand tumbled against all of its 16 most- traded counterparts as copper dropped to its lowest level in more than six weeks. Metals and other commodities account for 45 percent of the nation’s exports. The rand slid to the lowest in a week versus the dollar, losing as much as 2 percent to 8.8102.

The euro fell earlier as an index of sentiment among French factory executives dropped to 85 in October, the lowest since August 2009, from 90 last month, the statistics office Insee said in Paris.

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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