Yen Climbs as Slowing China Growth Fuels Haven Bid; Aussie Drops

Photographer: Tomohiro Ohsumi/Bloomberg

A customer holds a 1,000 yen bank note at a supermarket in Tokyo. The yen has lost at least 6 percent against all of its 16 major peers tracked by Bloomberg this year. Close

A customer holds a 1,000 yen bank note at a supermarket in Tokyo. The yen has lost at... Read More

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Photographer: Tomohiro Ohsumi/Bloomberg

A customer holds a 1,000 yen bank note at a supermarket in Tokyo. The yen has lost at least 6 percent against all of its 16 major peers tracked by Bloomberg this year.

The yen climbed against all of its 16 most-traded counterparts after China’s economic growth slowed more in the first quarter than economists forecast, fueling demand for haven assets.

Japan’s currency gained the most in seven weeks versus the dollar after sliding to a four-year low last week following the central bank’s decision to boost bond purchases under quantitative easing. The Australian dollar dropped the most in 17 months as Chinese data showed the nation’s biggest trading partner is losing momentum and commodities plunged, led by precious metals.

“No matter how much weakness the yen experiences, it continues to be one of the favorite safe-haven currencies,” Sireen Harajli, a foreign-exchange strategist in New York at Credit Agricole SA (ACA), said in a phone interview. “Even though weakness in yen might be somewhat limited or more gradual, I think the trend is for a weaker yen throughout this year.”

The yen advanced 1.7 percent to 96.77 per dollar at 5 p.m. in New York and reached 96.36, the strongest level since April 5. It weakened to 99.95 per dollar on April 11. The Japanese currency gained as much as 2 percent today, the biggest intraday jump since Feb. 25. The yen strengthened 2.2 percent to 126.16 per euro after jumping earlier as much as 2.7 percent, the most since March 18. The shared currency declined 0.6 percent to $1.3036.

Gold slumped, with futures for June delivery dropping to as low as $1,335.10 an ounce, after touching $1,582.90 a week ago. Some investors buy gold as a hedge against inflation and currency declines. Standard & Poor’s GSCI Index of raw materials slid 2.3 percent.

Excess Enthusiasm

“It’s pointing toward too much enthusiasm for a bad trade,” Michael Shaoul, chairman of New York-based Marketfield Asset Management LLC, said of gold’s decline in an interview on Bloomberg Television’s “Lunch Money” with Alix Steel and Adam Johnson. “I don’t think gold really is a safe haven. It was just a popular trade. I wouldn’t overcomplicate what its implications are for the global economy.”

Australia’s dollar slid as much as 2.1 percent, the biggest intraday drop since November 2011, to $1.0291 before trading at $1.0313, down 1.9 percent. New Zealand’s dollar fell as much as 2.5 percent, the most since September 2011, to 83.78 U.S. cents.

The rand was the biggest loser among the dollar’s most- traded peers, retreating the most in more than six months as raw materials tumbled. China is the biggest buyer of South Africa’s commodity exports. The rand lost as much as 3.2 percent, the biggest intraday slide since October, to 9.2298 per dollar before trading at 9.2043, down 2.9 percent.

China’s Economy

China’s gross domestic product expanded 7.7 percent last quarter from a year earlier, the National Bureau of Statistics said in Beijing. That compares with the 8 percent median forecast in a Bloomberg News survey and 7.9 percent growth in the previous three months.

The data add to concern the global recovery is struggling, with the International Monetary Fund set to lower its forecast for U.S. growth and investor George Soros saying Germany will probably be in recession by the end of September.

“The rebound in the yen was a knee-jerk reaction to the weaker-than-expected Chinese data,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “My view is that any pullback in the yen will be short-lived and the weakening trend prevails.”

The yen slid last week following the Bank of Japan (8301)’s pledge after its April 4 policy meeting to double the monetary base by the end of 2014 through buying more government bonds.

‘Very Weak’

The Japanese currency may drop to 130 to the dollar before paring losses, according to John Taylor, founder and chief executive officer of the currency hedge fund FX Concepts LLC. It will probably move back to parity with the dollar by September, Taylor said.

“It might not happen for two or three months, but I think the yen is going to get to be very weak -- 125 or 130,” Taylor said in an interview on Bloomberg Television’s “Market Makers” with Erik Schatzker and Sara Eisen.

The U.S. Treasury said April 12 it would pressure Japan to avoid “targeting its exchange rate for competitive purposes” in its semi-annual currency report to Congress released in Washington on April 12.

G-20 Meeting

Finance ministers and central bankers from the Group-of-20 nations meet April 18-19 in Washington. At their last gathering in February, they signaled Japan may stimulate its stagnant economy as long as policy makers refrain from publicly advocating a weaker yen.

“The semi-annual Treasury report has never been a market mover,” Geoffrey Yu, a senior currency strategist at UBS AG in London, said in a telephone interview. “With the exception of the Europeans, perhaps most policy makers are kind of partial to QE anyway.”

The Federal Reserve is buying $85 billion of Treasury and mortgage bonds a month in a third round of quantitative easing to spur U.S. growth.

The euro fell 0.3 percent over the past month against nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The dollar was little changed, while the yen sank 1.7 percent.

Europe’s shared currency dropped for a second day today against the yen as Moody’s Investors Service Inc. said the European-Union-led “bailout for Cyprus leaves fundamental solvency risks unaddressed.”

The EU said April 12 an agreement was reached between Cyprus and the so-called troika on an economic adjustment program required for 10 billion euros of financial assistance. The troika refers to the International Monetary Fund, the European Commission and European Central Bank.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

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

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