The yen strengthened for a second day against the dollar after Japan’s machinery orders stagnated in July and amid concern a sales-tax increase will hamper economic growth, boosting demand for the currency as a haven.
The euro fluctuated against the U.S. currency after weakening on a report that showed industrial output in the 17-nation region contracted in July. Australia’s currency weakened against all its major counterparts after a government report showed employers unexpectedly cut payrolls for a second month. The New Zealand dollar advanced as the central bank signaled it may raise interest rates next year from a record low.
“The stronger yen stems partly from the potential of further stimulus measures being introduced by the Japanese administration,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit, said in a telephone interview. “The future of Japan’s fiscal policy is driving the yen today.”
Japan’s currency rose 0.4 percent to 99.54 per dollar at 5 p.m. in New York after depreciating to 100.61 yesterday, the weakest level since July 22. The yen advanced 0.4 percent to 132.38 per euro after strengthening 0.2 percent yesterday. The dollar increased 0.1 percent to $1.3299 per euro.
South Africa’s rand declined versus most of its peers even after mining production in the country expanded 0.6 percent in July, exceeding the median estimate of a 6.1 percent contraction, according to a Bloomberg survey. Production declined 6.2 percent the previous month. The currency slipped 1 percent to 9.9708 per dollar.
The Australian dollar slid after data showed the nation’s payrolls unexpectedly fell and unemployment climbed to a four-year high. The currency decreased 0.6 percent to 92.72 U.S. cents after earlier falling 1.1 percent, the biggest drop since Aug. 21.
“You can see this as a genuinely soft employment report,” said Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney. “The fallback in the Aussie is justified.”
New Zealand’s dollar advanced against all 16 of its most-traded peers as the country’s central bank signaled it may raise interest rates next year from a record low. The so-called kiwi climbed 0.7 percent to 81.38 U.S. cents after touching its strongest level since Aug. 19.
“The RBNZ’s Monetary Policy Statement this morning was more hawkish than we had expected,” Imre Speizer, a market strategist at Westpac Banking Corp. (WBC) in Auckland, wrote in a note to clients. “The initial market reactions should persist throughout the day.”
Prime Minister Shinzo Abe will announce Japan will raise the sales tax to 8 percent from 5 percent in April as planned, the Yomiuri newspaper reported without saying where it got the information. Abe will detail a 5 trillion-yen stimulus package along with the tax increase, the paper said.
Japanese machinery orders were unchanged in July from the previous month when they fell 2.7 percent, the Cabinet Office said in Tokyo. Economists surveyed by Bloomberg News predicted an increase of 2.4 percent.
The yen “just ran out of steam,” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc. (8411), said in a phone interview. “Everybody knows that there’s still a lot of work to be done in Japan. While we have seen it going their way in the last couple of weeks here, they’re certainly not out of the woods yet.”
The yen has slumped 10.9 percent this year, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 3.8 percent and the euro advanced 4.7 percent.
Japan’s currency may weaken to “infinity” as the country’s central bank policy diverges from that of its U.S. counterpart, Axel Merk, who oversees about $635 million of currencies as founder and president of Palo Alto, California-based Merk Investments, said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee.
The euro weakened earlier after the European Union’s statistics office said factory production in the 17-nation region declined 1.5 percent from June, when it gained 0.6 percent.
Economists in a Bloomberg News survey predict euro-area growth will slow to 0.1 percent in the third quarter after a 0.3 percent expansion in the three months through June.
Trading in over-the-counter foreign-exchange options totaled $19.4 billion, compared with $26 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $5.2 billion, the largest share of trades at 27 percent. Options on the greenback-yuan rate totaled $2 billion, or 10 percent.
Dollar-yen options trading was 1.5 percent less than the average for the past five Thursdays at a similar time in the day, according to Bloomberg analysis. U.S. currency versus yuan options trading was about 74 percent more than average.
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