Emerging Currencies Gain as Ukraine Tension Eases; Yen Declines

Emerging-market currencies rose the most in more than a week as an easing of tensions in Ukraine drives investors’ demand for higher-yielding assets.

The ruble gained for the first time in seven days as Interfax news service reported that Russian troops on the Ukraine border have returned to their base. The yen fell against most of its 31 major peers as President Barack Obama issued sanctions on Russian individuals and companies. The euro gained as European Central Bank President Mario Draghi told German lawmakers quantitative easing isn’t imminent, according to a euro-area official. The pound rose to a four-year high.

“The way I’d put it is, it wasn’t as risk-negative as it could have been,” Alan Ruskin, the global head of Group of 10 foreign exchange at Deutsche Bank AG in New York, said in a telephone interview. “The day is still young. We have yet to see the Russians respond -- things are far from calm in Ukraine.”

A custom Bloomberg index with equal weightings of the dollar’s 20 major emerging-market peers rose 0.2 percent to 92.0324 as of 5 p.m. in New York, the biggest jump on a closing basis since April 17. It fell 0.6 percent last week, the biggest slide since the five days ended Jan. 24.

The yen dropped for the first time in five days against the dollar, losing 0.3 percent to 102.49. It fell 0.5 percent to 141.96 per euro. The greenback slipped 0.1 percent to $1.3851 per euro.

‘Selling Dollars’

The won rose the most after Brazil’s real among 24 emerging-market currencies tracked by Bloomberg, gaining 0.6 percent to 1,035.25 versus the dollar and touching the strongest level since April 17.

“A lot of exporters were seen selling dollars, as it’s near the end of the month,” said Han Sung Min, a Seoul-based currency trader for Busan Bank. “We also have public holidays coming soon.”

Shipments (KOEXTOTY) from Asia’s fourth-biggest economy probably increased 5.5 percent in April from a year earlier, after rising 5.1 percent in March, according to a Bloomberg survey of economists before official data due May 1. Foreign investors bought $3.1 billion more of the nation’s equities than they sold this month, exchange data show. South Korea’s financial markets are closed on May 1, 5 and 6 for holidays.

Sterling strengthened the most in almost two weeks against the U.S. dollar before data tomorrow that economists said will show gross domestic product increased at the fastest pace since 2010 in the first quarter. Pfizer Inc. said it’s interested in a deal to buy AstraZeneca Plc (AZN), Britain’s second-biggest drugmaker.

Long Sterling

“GDP figures are out tomorrow and with good news people have decided to test recent highs” for the pound, said Stuart Bennett, head of Group of 10 foreign-exchange strategy at Banco Santander SA in London. “The market is still quite long sterling, it’s a crowded trade at the moment and it’s going to take a lot to jump higher.” A long position is a bet that an asset price will rise.

The pound rose as much as 0.3 percent, the biggest increase since April 16, to $1.6858, the highest level since November 2009, before trading little changed at $1.6807.

The dollar rose the most in almost four weeks against the yen before the U.S. Federal Reserve meets this week and as investors await the latest reports on gross domestic product and employment.

“We’ve got GDP, that’s an extra big data we’re looking at in terms of currencies,” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc., said in a phone interview. “We’re looking at the positive side.”

U.S. GDP

U.S. economic growth expanded at a 1.2 percent annualized pace in the first quarter, the slowest in a year, based on the median forecast in a Bloomberg survey of analysts before the Commerce Department report on April 30.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was little changed at 1,010.89 after falling to 1,009.17, the lowest since April 17.

Employers in the U.S. added 215,000 workers this month, the most since November, economists project a May 2 report from the Labor Department will say.

The pending home sales index rose 3.4 percent in March, the most in almost three years, National Association of Realtors data showed today.

The Fed meets begins a two-day meeting tomorrow, when economists predict the central bank will cut its monthly asset-purchase stimulus program by another $10 billion to $45 billion. Policy makers will continue to taper at that pace until ending the program at its Oct. 28-29 meeting, according to a separate Bloomberg News survey.

Draghi Remarks

The euro gained against the dollar and the yen as Draghi said at the gathering attended by lawmakers from the parties that form Germany’s coalition government that the central bank does stand ready to embark on QE, or asset-buying, if needed, the official told reporters. The person asked not to be identified because the session in Koenigswinter, Germany, was private.

Draghi has said he is considering unprecedented measures from negative interest rates to QE to avert the risk of deflation as he guides the euro area through a gradual economic recovery. Government and central-bank officials in Germany, the region’s largest economy, have been among the strongest opponents of his more radical policies amid concern the ECB will overstep its mandate.

Russia Sanctions

The ruble gained even as the Obama administration sanctioned seven influential Russian individuals and 17 companies, including some involved in the financial, energy and infrastructure sectors, the White House announced today.

Russia has done nothing to meet its Geneva commitments and in fact has further escalated the crisis,” the White House said in an e-mailed statement.

The ruble added 0.6 percent to 42.0339 against the central bank’s target basket of dollars and euros. It lost 1.3 percent last week, when Standard & Poor’s lowered Russia’s credit rating to BBB- and the central bank raised the key interest rate 50 basis points to 7.5 percent to damp inflation.

JPMorgan Chase & Co.’s Group of Seven Volatility Index climbed for the first time in five days, advancing to 6.29 percent. The measure dropped to 6.18 percent on April 25, the lowest since July 2007.

To contact the reporters on this story: Andrea Wong in New York at awong268@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net

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

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