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Yen Declines as Traders Shrug Off Russia Sanctions; Euro Slips

Photographer: Sergio Dionisio/Bloomberg

Stockpiles of iron ore sit at the ship loading facility at Fortescue Metals Group Ltd.'s Herb Elliott Port in Port Hedland in the Pilbara region, Western Australia. Prices for iron ore delivered to China’s port of Tianjin fell yesterday to the lowest since March 12, according to data from The Steel Index. The steel-making material is Australia’s largest export earner. Close

Stockpiles of iron ore sit at the ship loading facility at Fortescue Metals Group... Read More

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Photographer: Sergio Dionisio/Bloomberg

Stockpiles of iron ore sit at the ship loading facility at Fortescue Metals Group Ltd.'s Herb Elliott Port in Port Hedland in the Pilbara region, Western Australia. Prices for iron ore delivered to China’s port of Tianjin fell yesterday to the lowest since March 12, according to data from The Steel Index. The steel-making material is Australia’s largest export earner.

The yen weakened, dropping most against its higher-yielding peers, as sanctions on Russia that failed to penalize the country’s major companies or banks boosted investors’ risk-taking appetites.

The euro snapped a five-day gain against the dollar after German inflation accelerated less than economists forecast, increasing pressure on the European Central Bank to add stimulus. South Korea’s won advanced to the highest since 2008 as a current-account surplus widened. The Canadian dollar rose the most in a month versus the greenback as traders who bet against the currency’s decline were forced to rewind orders.

Ukraine remains a risk, and the market is aware of that, but the market doesn’t believe it’s going to turn into a detrimental situation,” Sireen Harajli, a strategist at Mizuho Bank Ltd. in New York, said in a phone interview. “It just seems to me the market is looking at the Ukraine scenario as not very likely to blow up.”

The yen declined 0.8 percent versus the South African rand, 0.8 percent against Russia’s ruble and 0.6 percent against the won at 5 p.m. New York time.

Japan’s currency fell 0.2 percent to 102.64 per dollar after dropping 0.3 percent yesterday. It rose 0.1 percent to 141.76 per euro. Europe’s shared currency declined 0.3 percent to $1.3812 after touching $1.3879, matching the strongest level since April 11.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was little changed at 1,010.78.

Winners, Losers

The won leads gainers versus the dollar this month, adding 3.3 percent, more than double the increase of Brazil’s real, at 1.6 percent. Sweden’s krona fell 1.4 percent and New Zealand’s dollar dropped 1.3 percent to lead decliners.

The real is the biggest winner this year, up 5.6 percent, followed by New Zealand’s kiwi, gaining 4.1 percent. The largest decliners are Canada’s dollar, down 2.9 percent, and the krona, off 1.9 percent.

The South Korean currency appreciated today against most of its 16 major peers as the central bank said the excess in the nation’s broadest measure of trade increased to $7.35 billion in March from a revised $4.5 billion in February.

The won gained 0.5 percent to close at 1,030.57 per dollar in Seoul, after advancing to 1,030.49, the strongest since August 2008.

Loonie Soars

The Canadian dollar rallied as the currency’s gain past C$1.1 triggered stop-loss orders by traders shorting the currency, according to Bloomberg strategist Vincent Cignarella. A short is a bet an asset will decline in value. The loonie added 0.8 percent to C$1.0944 versus the greenback, the biggest advance since March 27.

The ruble rose on bets the U.S. and European Union are hesitant to deepen the standoff with President Vladimir Putin after Russia’s incursion into neighboring Ukraine last month. The U.S. sanctions list comprised seven Russian officials and 17 companies that didn’t include OAO Gazprombank or state-development bank Vnesheconombank.

Executives at Gazprombank, Russia’s third-largest lender, had been preparing for possible sanctions, two people with knowledge of the deliberations said last week, while development lender Vnesheconombank had taken precautions, according to a person familiar with talks at the lender.

The Russian currency advanced 0.7 percent to 41.7423 against the central bank’s target basket of dollars and euros. The Micex Index (INDEXCF) of stocks rose a second day after five down sessions, gaining 0.4 percent.

“The yen is also trading on a weaker footing as new sanctions on Russia weren’t as biting on the Russian economy as some had feared,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.

Winning Streak

The euro snapped its longest winning streak against the greenback since December as inflation, calculated using a harmonized European Union method, was 1.1 percent, up from 0.9 percent in March, the Federal Statistics Office in Wiesbaden said. Economists predicted a rate of 1.3 percent, according to the median of 21 estimates in a Bloomberg News survey.

“The market was expecting the headline number to be higher, with the timing of the Easter holiday,” said Athanasios Vamvakidis, head of Group of 10 currency strategy at Bank of America Corp. in London. The lower-than-forecast number “creates downside risks for euro-zone CPI data tomorrow.”

Eurostat, the EU’s statistics office in Luxembourg, will report tomorrow inflation rose 1 percent in April from a year earlier, compared to 0.7 percent the previous month, according to the median estimate of economists in a Bloomberg survey.

‘Long Sterling’

In Britain, sterling trimmed its gain from a four-year high after data showed the economy grew 0.8 percent in the first quarter, a slower pace than analysts estimated.

“It surprised the market,” said Paul Robson, a senior foreign-exchange strategist at Royal Bank of Scotland Group Plc in London, referring to the gross domestic product data. “The market had gotten long sterling, which makes the currency more vulnerable to a weaker number, but we’re not expecting much follow through as growth is still relatively good compared to main trading partners.” A long position is a bet an asset will appreciate.

The pound climbed 0.1 percent to $1.6827. It reached $1.6858 yesterday, the highest level since November 2009.

A measure of currency volatility slid as the U.S. Federal Reserve begins a two-day meeting. The central bank will probably cut its monthly asset-purchase stimulus program by another $10 billion to $45 billion tomorrow, a Bloomberg News survey of economists shows. Policy makers will continue to taper at that pace until ending the program at the Oct. 28-29 meeting, economists forecast.

Deutsche Bank AG’s volatility index, based on three-month options for nine major currency pairs, fell 10 basis points, or 0.1 percentage point, to 6.14 percent, the lowest since July 2007, based on closing prices. The measure fell 25 basis points yesterday.

To contact the reporter on this story: Andrea Wong in New York at awong268@bloomberg.net

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

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