Yen Climbs Against Major Counterparts as Refuge Demand Increases

The yen gained for a second day versus the dollar on demand for safety as stocks and commodities fell amid concern about instability in China’s financial system.

The Japanese currency advanced versus all of its 16 major peers as copper plunged to the lowest level since 2010. China had its first onshore bond default last week and over the weekend reported its biggest trade deficit in two years. Yields on Treasury 10-year notes fell for a second day. The South African rand tumbled as business confidence in the country unexpectedly declined.

“When you get disappointing data out of the world’s second-biggest economy, that’s going to be something that could dampen market sentiment,” Eric Viloria, a currency strategist at Wells Fargo & Co. in New York, said in a phone interview, referring to China. “Looking at Treasury yields today, they’re a little bit lower, and that’s something that’s going to weigh on the dollar-yen pair as well.”

The yen appreciated 0.2 percent to 103.02 per dollar at 5 p.m. in New York after gaining earlier as much as 0.4 percent. The Japanese currency strengthened 0.4 percent to 142.78 per euro. Europe’s shared currency weakened as much as 0.3 percent to $1.3834 before trading at $1.3860, down 0.1 percent. It rose on March 7 to $1.3915, the highest since October 2011.

Deutsche Bank AG’s Currency Volatility Index, based on three-month implied volatility on nine major currency pairs, fell to 7.14 percent, the lowest level since December 2012. JPMorgan Chase & Co.’s G7 Volatility Index dropped to 7.33 percent, also the least since December 2012.

Rand Sinks

South Africa’s currency dropped versus all of its 16 major counterparts after the BER Composite Business Confidence Index declined to a reading of 41 in the first quarter, from 43 in the previous period. Economists in a Bloomberg survey forecast an increase to 44.

The rand slid 1 percent to 10.8555 per dollar, erasing an earlier gain of 0.3 percent. It touched 10.8779, the weakest level since March 4.

The S&P 500 (SPX) Index of stocks fell 0.5 percent, and S&P’s GSCI Index (SPGSCI) of raw materials declined 0.2 percent.

Copper futures for May delivery dropped 2.6 percent to $2.9525 a pound on the Comex in New York, after touching $2.942, the lowest for a most-active contract since July 2010. Copper has tumbled 13 percent this year, the most among 34 commodities tracked by Bloomberg.

Tandem Movement

Once copper fell through a certain level, systematic commodity-trading advisers “were likely in selling,” said Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut. “There definitely seems to be the Standard & Poor’s and dollar-yen moving in tandem. Copper broke through a support level.” A support level is an area on a chart where orders may be clustered.

Russia showed no signs of yielding in a standoff with Ukraine over the region of Crimea, which will vote March 16 on joining Russia. Ukraine’s interim prime minister, Arseniy Yatsenyuk, meets with tomorrow in Washington with President Barack Obama.

“Markets are in a risk-off mood, especially in emerging-market foreign-exchange space,” said Alvin Tan, a currency strategist at Societe Generale SA in London. “There is some nervousness about Crimea, as we approach the Sunday referendum and Russia still unwilling to compromise.”

First Default

Holders of bonds sold by Shanghai Chaori Solar Energy Science & Technology Co. will consider a lawsuit to force payment, according to a Shenzhen Stock Exchange filing, after the company became the first to default on onshore corporate debt in China.

China’s exports unexpectedly fell 18.1 percent in February from a year earlier, customs data showed, compared with a forecast for an increase of 7.5 percent in a Bloomberg News survey. Imports rose 10.1 percent, leaving a trade deficit of $23 billion, the report showed. China is the world’s biggest metals consumer and Japan’s largest trade partner.

The yen gained versus the greenback as U.S. Treasury yields fell, dimming the appeal of dollar-denominated assets. Ten-year note (USGG10YR) yields declined one basis point, or 0.01 percentage point, to 2.77 percent, after touching a six-week high of 2.82 percent on March 7.

The Bank of Japan reiterated it will maintain monetary stimulus. The BOJ kept its pledge to expand the money supply at a pace of 60 trillion yen ($580 billion) to 70 trillion yen a year, in line with all but one forecast in a Bloomberg survey of economists.

The yen fell 7.5 percent over the past year against nine developed-nation peers tracked by Bloomberg Correlation-Weighted indexes. It was the worst performer after the Australian and Canadian dollars, which fell 15 percent and 8.6 percent. The euro gained 6.9 percent, and the U.S. dollar slipped 0.1 percent.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net Greg Storey, Paul Cox

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