Yen Gains as Traders Cut Bearish Bets; Brazil Real Climbs

Photographer: Kiyoshi Ota/Bloomberg

Euro, U.S. dollar and yen banknotes of various denominations are arranged for a photograph. Close

Euro, U.S. dollar and yen banknotes of various denominations are arranged for a photograph.

Close
Open
Photographer: Kiyoshi Ota/Bloomberg

Euro, U.S. dollar and yen banknotes of various denominations are arranged for a photograph.

The yen gained versus the majority of its 16 most-traded peers as investors reduced bets it would keep falling after declining for the past 11 weeks in the longest losing streak on record.

Japan’s currency advanced from its weakest level versus the dollar since 2010 as technical indicators signaled it may have slid too much. The pound fell to its weakest in more than 13 months versus the euro, while Brazil’s real climbed versus the greenback. The dollar gained versus most major counterparts before Federal Reserve policy makers open a two-day meeting tomorrow and the U.S. issues an employment report Feb. 1.

“What we’re seeing is a little bit of consolidation and anticipation of activities coming during the week,” Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage, said in a telephone interview. “The dollar-yen won’t stray too far from current levels ahead of the Fed and payrolls on Friday.”

The yen appreciated 0.1 percent to 90.79 per dollar at 1:36 p.m. New York time, after declining earlier to 91.26, the weakest level since June 2010. It strengthened 0.2 percent to 122.10 per euro. The 17-nation currency fell 0.1 percent to $1.3450.

The Japanese currency fell 5.7 percent in the past month in the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 2.3 percent, and the dollar increased 0.3 percent.

Yen Bets

The difference in the number of bets by hedge funds and other large speculators on a decline in the yen versus those on a rise, so-called net shorts, was 64,068 in the week ended Jan. 22, according to figures from the Commodity Futures Trading Commission. That’s the least bearish reading since November.

Traders expect the euro to extend its rally against the dollar, according to Lloyds Banking Group Plc, citing derivatives measuring the difference between implied volatility on calls and puts. The 17-nation common currency has strengthened 2 percent this month, poised for a sixth-straight gain, the longest stretch since 2003.

One-month 25-delta risk reversals, a gauge demand for call relative to puts, reached 0.1, the highest since 2009, according to data compiled by Bloomberg. Calls grant the right, but not the obligation, to buy the underlying futures. Puts grant the right to sell them.

Real, Krona

The Brazilian real and Sweden’s krona were the two biggest winners among the dollar’s most-traded peers.

The real rose to a six-month high after the central bank auctioned foreign-exchange swap contracts to shore up the currency and contain inflation. The currency appreciated 1.4 percent to 2.0010 per dollar and touched 2.0005, its highest level since July 3.

Sweden’s krona gained against all of its major counterparts except the real as retail sales in the country increased 1.2 percent last month, easing pressure on the central bank to cut interest rates. The krona rose 0.6 percent to 6.4188 per dollar after touching 6.4110, its strongest since October 2011. The currency climbed 0.7 percent to 8.6312 per euro.

South Africa’s rand was the biggest loser as foreigners reduced holdings of the country’s assets on concern labor unrest and mining output cuts will weigh on the nation’s current- account deficit. The currency weakened 1.9 percent to 9.1182 per dollar and touched 9.1604, its lowest level since April 2009.

Relative Strength

The yen’s 14-day relative strength index against the dollar was at 30.5, near the 30 level that some traders see as a signal an asset has fallen too far, too fast and may be due to reverse course. Against the euro, it was 29.8.

Once the yen’s exchange rate against the dollar gets “north of 90 to 91, the impetus, or the ability to break higher, will prove to be a little more compromised,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The combination of data points should be reasonably dollar-supportive.”

Orders for durable-goods in the U.S. rose 4.6 percent in December after a 0.7 percent gain the prior month, a Commerce Department report showed today in Washington. The median forecast in a Bloomberg survey called for a 2 percent gain.

Pending U.S. home sales declined in December for the first time since August, showing uneven progress in the housing market. They slid 4.3 percent.

The pound depreciated 0.6 percent to 85.73 pence per euro and reached 85.87 pence, the weakest level since December 2011. Sterling dropped 0.7 percent to $1.5686 and touched $1.5675, the least since August.

Home prices in England and Wales were unchanged from December, after declining for the previous six months, Hometrack Ltd. said in a statement today. Data released on Jan. 25 showed the U.K. economy shrank more than forecast in the final quarter of 2012, tipping it back toward recession.

Fed Meeting

The U.S. Federal Open Market Committee opens a two-day meeting tomorrow as investors speculate when policy makers will begin to slow stimulus.

Employers in the U.S. added 161,000 workers in January, after a 155,000 increase in December, a Bloomberg survey of economists showed before the Labor Department reports the data on Feb. 1.

To contact the reporter on this story: 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.