Yen Falls to 1-Week Low on Reduced Haven Demand Tied to Ukraine

The yen fell to a one-week low versus the dollar on reduced demand for safer assets as Russian and U.S. diplomats met in Paris to address issues surrounding the political crisis in the Ukraine.

The dollar decreased against the majority of its 16 major counterparts after weaker-than-forecast jobs data added to concern the U.S. economy has been slowed by harsh winter weather. The euro declined against the dollar before the European Central Bank meets to review monetary policy tomorrow. Canada’s dollar rose versus the greenback after Bank of Canada Governor Stephen Poloz kept its benchmark interest rate unchanged and said the next move depends on economic progress.

“The yen acts as a funding currency when people want to take risks, and people are unwinding safe-haven flows,” Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut, said in a phone interview. “We’re definitely in a stalemate with the Ukraine situation, and markets are more than happy to continue to buy risk assets.”

The yen weakened 0.1 percent to 102.30 per dollar as of 5 p.m. in New York after falling to 102.55, its lowest level since Feb. 26. It appreciated to 101.20 on March 3, the strongest level since Feb. 5. The yen was little changed at 140.49 per euro. Europe’s shared currency fell 0.1 percent to $1.3733.

Real Rally

Brazil’s real gained versus all 31 of its major peers as eased tension in Ukraine revived demand for emerging-market assets. The currency appreciated 1.1 percent to 2.3188 per dollar, after rising the most since Feb. 27.

Canada’s dollar reached the highest level in two weeks after the Bank of Canada kept the overnight rate on loans between commercial banks at 1 percent for the 28th straight meeting. The currency fell to a 4 1/2 year low in January as investors bet on lower interest rates after the central bank said inflation would stay near the bottom of its 1 percent-to-3 percent target band this year and flagged the strong currency as a headwind to exports.

The loonie, as the currency is nicknamed, gained 0.6 percent to C$1.1029 versus the U.S. dollar.

The British pound strengthened versus most of its major counterparts after an industry report showed U.K. services output expanded in February, adding to signs Britain’s economy is gaining momentum. Sterling appreciated 0.4 percent to 82.13 pence per euro after gaining 0.5 percent, the biggest increase since Feb. 12.

Jobs Data

The U.S. currency weakened as companies added 139,000 workers in February following a revised 127,000 gain in January that was weaker than initially reported, according to the ADP Research Institute in Roseland, New Jersey. The median forecast of 39 economists surveyed by Bloomberg called for a 155,000 advance.

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.

The Institute for Supply Management’s non-manufacturing index fell to 51.6, lower than any forecast of economists surveyed by Bloomberg and the weakest since February 2010, the Tempe, Arizona-based group said today.

Investors are optimistic that “the payback resulting from the cold winter will produce a positive hiring rebound come the spring,” Andrew Wilkinson, the Greenwich, Connecticut-based chief market analyst at Interactive Brokers LLC, wrote in a client note. “Investors are likely to grit their teeth and cling to the weather-driven story.”

Aussie Report

Australia’s dollar strengthened for a third day after gross domestic product expanded 0.8 percent in the final quarter of 2013, the Bureau of Statistics said in Sydney, exceeding the 0.7 percent prediction of economists surveyed by Bloomberg News. The data boosted speculation the central bank has finished cutting interest rates.

The Aussie rose 0.4 percent to 89.85 U.S. cents, after gaining 0.3 percent during the previous two days.

The yen weakened against all of its 16 major peers as Russian Foreign Minister Sergei Lavrov said the western-backed government in Kiev no longer rules over Crimea. U.S. Secretary of State John Kerry warned Russia against violating “very clear legal obligations” to uphold Ukraine’s unity.

Lavrov and Kerry met in Paris for the first time since pro-Russian forces seized control of Crimea.

Market Positions

“The market is leaning in favor of being long dollar-yen,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc, said in a phone interview. “Dollar-yen had a big move lower on Monday as the situation in the Ukraine escalated. The reversal of that move has pushed us back into the middle of the year’s range.”

ECB policy makers led by President Mario Draghi will keep their benchmark interest rate at a record-low 0.25 percent tomorrow, according to 40 of the 54 economists surveyed by Bloomberg News. Six forecast a reduction to 0.15 percent and eight predict a cut to 0.1 percent, the survey showed.

Euro-area gross domestic product rose 0.3 percent in the three months through December from the third quarter, the European Union’s statistics office in Luxembourg said. That’s in line with Eurostat’s initial estimate published last month.

The euro has lost 0.4 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The yen added 2.9 percent, while the dollar lost 0.4 percent.

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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