Dollar, Yen Gain Amid U.S. Fiscal Cliff, Europe Concerns

The yen strengthened as investors sought refuge assets amid concern re-elected President Barack Obama and the U.S. Congress will struggle to avert the so-called fiscal cliff.

The euro traded near a two-month low versus the dollar before a European Central Bank meeting today after ECB President Mario Draghi said Europe’s debt crisis is affecting Germany. A report showed exports in Europe’s largest economy declined the most in nine months in September. The greenback remained weaker against the Japanese currency after Obama’s victory over Republican Challenger Mitt Romney boosted speculation the Federal Reserve will maintain monetary stimulus.

“The biggest focus of the market as we head into year-end will be the fiscal cliff,” said Noriaki Murao, the New York- based managing director of the marketing group at the Bank of Tokyo-Mitsubishi UFJ Ltd., referring to the $607 billion in tax increases and spending cuts set to be implemented in 2013 unless Congress acts. “Investors are buying safe currencies such as the dollar and yen.”

The yen advanced 0.1 percent to 79.94 per dollar as of 8:37 a.m. in London. It rose 0.1 percent to 102.09 against the euro. The dollar was little changed at $1.2770 versus the 17-nation currency. It reached $1.2737 yesterday, the strongest since Sept. 7.

Fed Stimulus

Romney had said he disagreed with the Fed’s measures to stimulate the economy and would replace Chairman Ben S. Bernanke at the end of the latter’s term in January 2014. U.S. policy makers unveiled a plan in September to buy $40 billion of mortgage-backed securities every month in a third round of so- called quantitative easing after $2.3 trillion purchases of bonds from December 2008 and June 2011.

The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, was at 80.782 from 80.759 yesterday, when it touched 80.924, the highest since Sept. 7.

“What we’re seeing now is a post-election bounce in the U.S. dollar,” Khoon Goh, a senior currency strategist in Singapore at Australia & New Zealand Banking Group Ltd. (ANZ), said in an interview on Bloomberg Television’s “On The Move Asia” with Rishaad Salamat. “The fiscal cliff will be the near-term focus for markets which will cause jitters.”

The euro was little changed before the ECB meeting amid economic data today which may add to evidence Europe’s debt crisis is hampering growth. All but one of 63 economists surveyed by Bloomberg News predict the central bank will keep its benchmark interest rate unchanged at 0.75 percent.

German Economy

“While a rate cut is unlikely, we should certainly expect some dovish commentary from ECB President Draghi at the post meeting press conference,” Ray Attrill, Sydney-based global co- head of currency strategy at National Australia Bank Ltd., wrote in a note to clients today.

Draghi said at a conference in Frankfurt yesterday that while Germany has been largely insulated from difficulties elsewhere in the euro area “the latest data suggest that these developments are now starting to affect the German economy.”

German exports, adjusted for work days and seasonal changes, dropped 2.5 percent from August, when they gained 2.3 percent, the Federal Statistics Office said today. That’s the biggest slide since December. Economists forecast a 1.5 percent decline, according to the median of 16 estimates in a Bloomberg News survey.

Greek Approval

The euro remained weaker even after Greek Prime Minister Antonis Samaras won approval of austerity measures needed to unlock bailout funds. The bill on pension, wage and benefit cuts was approved with 153 votes in favor in the 300-seat Parliament early today, according to acting Parliament speaker Athanasios Nakos.

“The Greek approval of austerity measures was not enough to turn the sentiment around for the euro,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Financial Group Inc. (8411), Japan’s third-largest bank by market value. “There is still uncertainty whether or not Greece will be able to secure the next tranche of aid at the next European Union summit. The yen and the dollar are being bought in a bid for safety.”

The euro declined 0.7 percent over the past week, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar rose 0.8 percent in the same period, while the yen gained 1 percent, the best performer.

Earnings forecasts released today by European Aeronautic, Defence & Space Co. (EAD) suggest it anticipates a stronger euro. Europe’s biggest aerospace and defense company said its new hedge contract had an average rate of $1.29 per euro.

Aussie Dollar

The so-called Aussie dollar rose against most of its major peers after data showed Australian employers added more jobs in October than economists estimated.

The number of people employed in Australia increased by 10,700 last month after rising a revised 15,500 in September, the statistics bureau said today. That compares with economist forecast in a Bloomberg survey of a gain of 500.

The Aussie added 0.1 percent to $1.0416. It climbed to NZ$1.2752, the highest since Sept. 17.

Today’s data from Australia “was stronger than expected,” said Sue Trinh, a Hong Kong-based senior currency strategist at Royal Bank of Canada. “It’s no surprise to see the Aussie outperforming across the board.”

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net.

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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