Yen Gains as Traders Bet Recent Selling Overdone; Aussie Tumbles

The yen strengthened for the first time in four days versus the dollar as investors bet losses that brought it to within 0.6 percent of 100 against the U.S. currency were overdone.

The Australian dollar fell against all 16 of its major counterparts after the central bank cut interest rates to a record low. The dollar halted its longest streak in more than two weeks which has been sustained by better-than-expected U.S. payrolls data. The euro was little changed against the greenback before data forecast to show factory orders in Europe’s biggest economy declined in March. Sweden’s krona advanced on better- than-forecast industrial production data.

“We’re around the 100-yen mark again and I think it’s inevitably forming a lasting line of resistance,” said Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London. “Dollar-yen hasn’t been able to get a foothold above that level. There’s a very good chance we could get this oscillation we’ve been seeing since the middle of April for the foreseeable future.”

The yen gained 0.2 percent to 99.13 per dollar at 10:56 a.m. London time after depreciating 2 percent in the past three sessions. It reached 99.95 on April 11, the weakest level since April 2009. The Japanese currency appreciated 0.3 percent to 129.55 per euro. Europe’s shared currency was little changed at $1.3072 from yesterday, when it slid 0.3 percent.

Japanese markets reopened today following a four-day holiday weekend.

Labor Report

The yen weakened beyond 99 per dollar for the first time since April 26 on May 3, when U.S. Labor Department data showed payrolls expanded by a greater-than-forecast 165,000 workers last month and the jobless rate unexpectedly declined to 7.5 percent. The currency touched 99.45 yesterday.

“The wall between 99 and 100 yen per dollar is very thick, and we need some additional drivers to reach 100,” said Marito Ueda, the senior managing director at FX Prime Corp. (8711), a currency-margin company in Tokyo. “While last week’s payrolls report was strong, investors want to know if the U.S. economy will strengthen further from here.”

The yen has fallen more than 20 percent in the past six months, the most among 10 developed-market currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar has risen 1.3 percent and the euro has gained 4 percent.

Aussie Rates

The so-called Aussie fell for a second day after the Reserve Bank cut its benchmark interest rate by 25 basis points, or 0.25 percentage point, to 2.75 percent. The move was predicted by eight of the 29 economists surveyed by Bloomberg.

The central bank “judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy,” Governor Glenn Stevens said. “Recent data on prices confirm that inflation is consistent with the target and, if anything, a little lower than expected.”

The Aussie dollar fell 0.8 percent to $1.0171 after touching $1.0165, the weakest level since March 4.

The “Aussie is unsurprisingly under the hammer,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “We look now to Friday’s statement on monetary policy to gauge how far inflation and growth forecasts have been cut.”

Demand for the euro was capped before a report that economists said will show German factory orders fell in March. Orders slid 0.5 percent, according to a Bloomberg News survey.

Separate data showed French industrial production contracted 0.9 percent in March, according to national statistics office Insee, more than the estimated 0.3 percent decline forecast by economists in a Bloomberg survey.

Draghi Comments

“We will be looking at all the data that arrives from the euro-area economy in the coming weeks and, if necessary, we are ready to act again,” European Central Bank President Mario Draghi said yesterday after the ECB cut its benchmark rate to a record-low 0.5 percent last week. He said policy makers had an open mind on a negative deposit rate.

“The euro will probably continue to grind lower,” said Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York. “As Draghi noted, the economic data will be key going forward. Europe is likely to underperform the U.S.”

Sweden’s strengthened as reports showed a recovery in industrial production in March, reducing pressure on the central bank to lower interest rates. Production was unchanged from a year earlier, compared with an estimated 0.5 percent decline in a Bloomberg survey. Orders soared 11.2 percent from a year earlier.

The krona appreciated 0.3 percent to 6.5307 per dollar. It also gained 0.3 percent against the euro to 8.5388.

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

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

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