Yen Falls for Second Day as Demand for Haven Wanes

The yen weakened for a second day versus the dollar amid signs that turmoil in emerging markets is abating and as better-than-forecast consumer-confidence data and corporate earnings shored up investor optimism.

The lira jumped as Turkey’s central bank more than doubled its main interest rate at an extraordinary meeting. The greenback fell against most of 24 major developing-economy currencies as the Federal Reserve began a two-day gathering at which economists forecast it will cut monthly asset purchases by $10 billion. The Swiss franc slid along with the yen against the majority of 31 main counterparts as developing nations’ stocks ended a three-day rout, damping demand for haven assets.

“Emerging-market risk-aversion fears remain but are easing,” Rahim Madhavji, president at Knightsbridge Foreign Exchange in Toronto, wrote in an e-mail. “The U.S. dollar continues to attract flows as the U.S. economy is generally showing strength, and U.S. yields are creeping higher.”

The yen weakened 0.4 percent to 102.94 per dollar at 5 p.m. New York time after declining 0.7 percent. It touched 101.77 yesterday, the strongest level since Dec. 6. Japan’s currency dropped 0.4 percent to 140.73 per euro. The dollar was little changed at $1.3671 per euro.

The Swiss franc weakened for a second day, falling 0.1 percent against the dollar to 89.72 centimes per dollar. On Jan. 24, it touched 89.03, its strongest level in more than three weeks.

The Bloomberg Dollar Spot Index was little changed at 1,026.40 after reaching 1,025.15, the lowest since Jan. 14.

Turkey Rates

Turkey’s lira strengthened for a second day as the bank in Ankara raised the benchmark repo rate to 10 percent from 4.5 percent, according to a statement posted on its website at midnight local time. It also raised the overnight lending rate to 12 percent from 7.75 percent, and the overnight borrowing rate to 8 percent from 3.5 percent.

The lira advanced 1.4 percent to close at 2.2525 per dollar and then extended gains after the announcement, adding more than 3 percent.

“Risk appetite has also been given a boost due to expectations the Turkish central bank will hike rates at their meeting today.” Eimear Daly, head of market analysis at Monex Europe Ltd. in London, said before the announcement. “The stabilization in USDJPY today is also in line with a general risk-on mood to market.”

Russia, Nigeria

Russia canceled its first bond auction ahead of schedule for the first time since June as the ruble continued its worst start to the year since 2009.

The ruble, which declined 0.3 percent to 34.8348 versus the greenback today, was the worst-performing of 10 currencies tracked by Bloomberg in Europe, the Middle East and Africa against the dollar this year.

Nigeria’s central bank will increase its share of yuan in reserves to 7 percent from 2 percent, Deputy Central Bank Governor Kingsley Moghalu said in a London interview today.

“Ultimately, the renminbi is likely to become a global convertible currency,” Moghalu said, adding that the central bank is working with People’s Bank of China to put the relevant structure in place.

The Chinese yuan, also known as the renminbi, was little changed at 6.0508 per dollar. Nigeria’s naira traded at 162.47 per dollar.

Rupee, Aussie

India’s rupee strengthened after the nation’s central bank unexpectedly raised its benchmark interest rate, climbing 0.9 percent to 62.515 per dollar. Asian currencies rallied after an accord to stave off losses for investors in a trust in China averted a threatened default.

The Aussie dollar rose 0.8 percent to 90.37 yen after adding 1.5 percent, its biggest advance in more than seven weeks. It gained 0.5 percent to 87.79 U.S. cents. China is Australia’s biggest trading partner.

“The market overreacted in the risk-off move last week and some are taking advantage of good levels to increase risk,” said Athanasios Vamvakidis, head of Group of 10 currency strategy at Bank of America Merrill Lynch in London. “Also, although everyone expects the Fed to continue tapering this week, they also expect dovish forward guidance, which will be positive for risk.”

Stocks Rise

Almost 74 percent of the Standard & Poor’s 500 Index of companies that have posted earnings this season beat analysts’ projections. Profit at S&P 500 companies probably rose 6.6 percent in the fourth quarter of 2013, and sales increased 2.3 percent, analysts’ estimates compiled by Bloomberg show.

The S&P 500 Index rose 0.6 percent today. The MSCI Emerging Markets Index climbed 0.4 percent after dropping more than 1 percent in each of the past three days, while the STOXX Europe 600 Index added 0.7 percent.

The dollar extended gains versus the yen after the Conference Board’s index of consumer confidence rose to 80.7 in January, more than forecast, from a revised 77.5 in the prior month, the New York-based private research group said today.

It weakened earlier as bookings for goods meant to last at least three years dropped 4.3 percent after a 2.6 percent gain in November that was smaller than previously reported, a Commerce Department report showed. The median estimate in a Bloomberg survey called for a 1.8 percent advance.

The U.S. dollar was underpinned by projections for a further trimming of monetary stimulus as the economy strengthens. The Federal Open Market Committee will reduce the U.S central bank’s monthly asset purchases, now at $75 billion, by $10 billion at each of its meetings to end the stimulus program this year, according to the median forecasts of analysts in a Jan. 10 Bloomberg News survey.

The yen’s drop pared its advance this year to 3 percent, still the biggest in Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The dollar has gained 0.8 percent and the euro has added 0.1 percent.

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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