The yen rallied against all of its 16 most-traded peers after it failed yesterday to weaken beyond 100 to the dollar, a level not seen in four years, and a technical indicator signaled it had fallen too much, too fast.
The Dollar Index (DXY) pared gains after U.S. retail sales and consumer confidence unexpectedly slid, fueling bets the Federal Reserve will maintain stimulus that may debase the greenback. The Canadian and Australian dollars weakened as risk appetite faded and stocks dropped. The yen still had a weekly loss, dropping after the Bank of Japan (8301) announced unprecedented stimulus on April 4 to end 15 years of deflation.
“The failure to really close above 100 has encouraged some profit taking,” Mike Moran, a senior currency strategist at Standard Chartered Plc in New York, said in a telephone interview. “The softer U.S. number today confirmed investors’ suspicion that this leg in the move higher is fading and it’s a good time to take profits.”
The yen appreciated 1.3 percent to 98.37 per dollar at 5 p.m. New York time, after touching 99.95 yesterday, the weakest since April 14, 2009. It lost 0.8 percent this week in its second five-day drop.
The U.S. currency slipped 0.1 percent to $1.3113 per euro after gaining earlier as much as 0.5 percent. The dollar declined 0.9 percent this week against Europe’s shared currency. The euro fell 1.2 percent today to 129.02 yen after advancing to 131.12 yesterday, the most since January 2010.
The U.S. Treasury said in a report it will press Japan to refrain from competitive devaluation and from targeting its exchange rate for competitive purposes. It declined to name China a currency manipulator. China’s yuan rose 0.1 percent to 6.1921 to the greenback, the strongest level since 1993 on a closing basis.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major trade partners, fell 0.2 percent to 82.127 after rising 0.3 percent earlier to 82.491.
Stocks declined, with the Standard & Poor’s 500 Index falling 0.3 percent. Gold tumbled, with futures for June delivery dropping as much as 5.7 percent to $1,476 an ounce.
“Profit-taking across the board, it seems,” said Sebastien Galy, a foreign-exchange strategist at Societe Generale SA in New York, referring to the drop in gold and the Japanese currency’s rally.
Mexico’s peso fell from a 20-month high after the sales report at its biggest trade partner. The currency weakened 0.3 percent to 12.0759 per U.S. dollar after touching 12.0194 yesterday, the strongest intraday level since August 2011.
U.S. retail sales dropped 0.4 percent in March, the biggest decline since June, following a 1 percent gain in February, Commerce Department figures showed. A Bloomberg survey forecast an unchanged reading.
“The risk currencies, the ones you’d expect to respond, are getting hurt,” Dan Dorrow, the head of research at Faros Trading LLC in Stamford, Connecticut, said in a phone interview. “Any growth-, risk-sensitive currency is getting hit.”
Canada’s dollar weakened 0.3 percent to C$1.0136 to the greenback, while Australia’s sank 0.4 percent to $1.0508. Both nations produce commodities for export.
Confidence among Americans fell in April to a nine-month low, another report showed. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment declined to 72.3 in April from 78.6 a month earlier.
The Fed is purchasing $85 billion of bonds a month in the third round of its quantitative-easing strategy to spur economic growth. It reiterated in March it would keep buying until there’s significant improvement in the labor market.
Fed Chairman Ben S. Bernanke said April 8 in Stone Mountain, Georgia, that economic conditions “are clearly still far from where we would all like them to be,” stoking bets policy makers will need longer to exit the stimulus program.
Bernanke spoke today at a conference in Washington on low- income communities. His remarks didn’t mention monetary policy or the economic outlook.
The yen’s 14-day relative-strength index versus the greenback was 28.3 yesterday, its fourth straight day below the level of 30 that some traders see as a sign an asset has fallen too quickly. It was 36.7 today.
The Bank of Japan surprised markets on April 4 by doubling monthly bond purchases to almost match the Fed’s monetary easing and setting a two-year horizon for achieving its goal of 2 percent inflation. BOJ Governor Haruhiko Kuroda said today there’s no time limit to the stimulus. He reiterated that the BOJ’s policies are not aimed at foreign-exchange rates.
“There’s definitely some fear of inflation,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “That’s what they’re trying to do, create inflation, so if you’re a bondholder, that’s not good.”
Yields on 10-year Japanese government bonds have climbed eight basis points, or 0.08 percentage point, this week to 0.61 percent, the highest on a closing basis since March 15.
“Mr. Kuroda understands that you can’t do this halfway,” Kenneth Rogoff, an economics professor at Harvard University and a former chief economist at the International Monetary Fund, said in an interview on Bloomberg Television’s “Surveillance” with Tom Keene and Sara Eisen. “It is not rocket science for the government to spend money, and the bank to print money and eventually to get inflation. It’s a matter of the balance of risks, and will they get cold feet.”
The yen tumbled 3.8 percent in the past month, according to Bloomberg Correlation Weighted Indexes, which tracks 10 developed-market currencies. The dollar fell 1.2 percent, and the euro lost 0.5 percent.
The euro slipped today against the dollar as European Union officials discussed rescue-loan extensions for Ireland and Portugal. They agreed in principle at a meeting in Dublin to seven-year extensions.
Futures traders increased to the most since June 2010 their bets that sterling will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the pound compared with those on a gain -- so-called net shorts -- was 69,969 on April 9, compared with net shorts of 65,020 a week earlier.
The pound declined 0.3 percent today to $1.5343 after touching $1.5412 yesterday, the highest since Feb. 20. For the week, sterling was little changed.
To contact the reporter on this story: John Detrixhe in New York at email@example.com