Yen Falls Most in 7 Weeks as Russia Recalls Troops; Franc Slides

The yen declined the most in seven weeks versus the dollar as Russian President Vladimir Putin said there’s no immediate need to send troops to Ukraine, damping demand for safer assets.

Japan’s currency dropped versus all of its 16 major counterparts, a day after being the biggest gainer, as Russia’s ruble rallied after Putin said he’d only send soldiers to Ukraine in an extreme case. U.S. Secretary of State John Kerry arrived in Kiev as the U.S. and its European allies seek ways to increase economic and diplomatic pressure on Putin. The Swiss franc weakened versus the euro.

“They’re backing down from the military threat and markets are taking that as a risk-on event, which is hurting haven currencies,” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc., said in a phone interview. “Russia initially took an extremely strong stance against the Ukraine, and markets and risk were off yesterday.”

The yen weakened 0.8 percent to 102.21 per dollar as of 5 p.m. in New York, reaching the biggest decline since Jan. 14. It appreciated to 101.20 yesterday, the strongest level since Feb. 5. The yen fell 0.8 percent to 140.47 per euro. Europe’s shared currency increased 0.1 percent to $1.3743.

Franc Falls

The franc declined 0.5 percent to 1.21940 per euro, after reaching 1.21044 yesterday, the strongest level since Jan. 10, 2013. To safeguard the economy from deflation and a recession, the Swiss National Bank, the Zurich-based central bank, set a cap of 1.20 per euro on the franc in September 2011.

Indonesia’s rupiah declined against the majority of its major counterparts after the January trade balance unexpectedly swung into deficit, complicating government efforts to trim a current-account shortfall. The currency was little changed at 11,595 per dollar after weakening 0.7 percent, the most since Feb. 18.

The South African rand gained versus all 31 of its most-traded peers even as Goldman Sachs said the currency is set to weaken as much as 25 percent. The rand rose 1.3 percent to 10.7551, the largest gain since Feb. 24.

The 18-nation was little changed versus the greenback before a European Central Bank decision March 6 that may determine the future of monetary stimulus in the euro area. In a Bloomberg survey of 54 economists, only 14 predict a cut in the 0.25 percent benchmark policy rate. Of those, eight see a 15-basis point move to 0.1 percent.

Putin Commentary

Putin’s comments signal that the Ukraine crisis, the worst between Russia and the West since the Cold War ended, won’t immediately escalate. The standoff has roiled global markets after Russian forces seize the Crimean peninsula in southern Ukraine and as international diplomats rush to formulate a resolution.

Putin ordered troops to go back to bases, Interfax said, citing the president’s spokesman Dmitry Pesko. Troops had moved to western and central military districts as part of military exercises, the Russian Defense Ministry said last month.

“There’s a big reversal in yen today that’s entirely related to the geopolitics in the Ukraine,” Greg Anderson, head of global foreign-exchange strategy in New York at Bank of Montreal, said in a phone interview. “Risk-on, risk-off is what explains the market right now, so it’s no surprise yen has slipped.”

The ruble appreciated 1.2 percent to 42.1324 against Bank Rossii’s target basket of dollars and euros after touching a record low yesterday.

Commodity Prices

A custom Bloomberg index with equal weightings of seven commodity currencies increased 0.3 percent. The gauge’s monthly gain of 1.1 percent for February was the biggest since December 2012. An increased level of volatility raises the risk of unexpected price moves, spurring investors to avoid the higher-yielding commodity bloc.

Australia’s dollar gained 0.1 percent to 89.50 U.S. cents after sliding to as low as 88.91 yesterday, a level not seen since Feb. 5. The Reserve Bank left its benchmark interest rate unchanged at a record-low 2.5 percent to spur domestic industries and offset a slump in mining investment.

“The decline in the exchange rate seen to date will assist in achieving balanced growth in the economy, though the exchange rate remains high by historical standards,” RBA Governor Glenn Stevens said in a statement accompanying the decision. He last month refrained from language pointing to the currency trading at a high level.

Labor Department figures on March 7 will show U.S. payrolls rose 150,000 last month, according to a forecast of economists in a survey by Bloomberg. The U.S. posted a 113,000 employment increase in January. The unemployment rate is projected to remain at 6.6 percent, the lowest level since October 2008.

“Nonfarm payrolls is the next big event,” Mizuho’s Eliasson said. “Markets haven’t really corrected themselves downwards based on data because it’s been discounted in the market because of winter. It will be a closely-watched number.”

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

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

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