Yen Weakens for Third Day as Ukraine Tensions Ease; Ruble Gains

The yen weakened for a third day against the dollar as signs that tensions in Ukraine and Russia are easing and a rally in stocks damped demand for safer assets.

Japan’s currency declined versus all except two of its 16 major counterparts as Russia’s ruble climbed to the strongest level in three months. The euro dropped to a five-week low versus the dollar after a German report showed investor confidence declined. Sweden’s krona rose to the strongest in a month versus the euro as a report showed the nation exited deflation in April. Australia’s dollar fell after data showed Chinese industrial production and retail sales slowed.

“There’s a gradual improvement in global investor risk sentiment, which is undermining the yen,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Concerns over developments in Ukraine and emerging markets are easing. Investors are looking to put on carry positions, placing low-yielding funding currencies like the yen under pressure.”

The yen fell 0.1 percent to 102.27 per dollar at 10:41 a.m. in London after depreciating to 102.36, the weakest level since May 2. Japan’s currency dropped 0.1 percent to 140.62 per euro. The euro was little changed at $1.3749 after declining to $1.3740, the least since April 8.

Russian President Vladimir Putin and Didier Burkhalter, chairman of the Organization for Security and Cooperation in Europe, agreed on the need for talks in Ukraine after weekend referendums on independence in two eastern regions, the Kremlin said yesterday in an e-mailed statement.

Sanctions List

While the European Union expanded its sanctions list on Russia yesterday, EU and American policy makers say they are concerned broad-brush sanctions on Russia’s energy and financial sectors risk provoking economically costly retaliation.

The ruble rallied 0.5 percent to 40.8077 against the central bank’s target basket of dollars and euros, set for the strongest close since Feb. 12.

The MSCI Asia Pacific Index of shares rose 1.1 percent and the Stoxx Europe 600 Index gained 0.1 percent.

The yen has weakened 4.8 percent in the past six months, the second-worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar slipped 1.5 percent, while the euro gained 0.6 percent.

German Confidence

The euro erased an advance against the dollar as the ZEW Center for European Economic Research said its index of German investor and analyst expectations slid to 33.1 in May from 43.2 the previous month.

European Central Bank President Mario Draghi has signaled he may add monetary stimulus in June because policy makers are “dissatisfied” with the inflation outlook, in part due to an increase in the exchange rate.

The krona advanced for a second day as Statistics Sweden said consumer prices in the nation were unchanged in April from a year earlier. A Bloomberg survey of economists predicted a decline of 0.1 percent.

The Riksbank last month signaled greater willingness to cut borrowing costs, and delayed tightening plans until the second quarter of next year even as a majority on the board is reluctant to ease monetary policy to avoid a further buildup in consumer debt.

The krona rose 0.3 percent to 8.9999 per euro after appreciating to 8.9941, the strongest since April 10. The Swedish currency gained 0.3 percent to 6.5453 per dollar.

The Australian dollar weakened as China’s industrial production rose 8.7 percent in April from a year earlier, less than the increase of 8.9 percent forecast by economists surveyed by Bloomberg. The country’s retail sales rose 11.9 percent last month, falling short of economists’ forecast of 12.2 percent. China is Australia’s largest trading partner.

The Aussie dropped 0.2 percent to 93.39 U.S. cents after appreciating to 93.94 cents on May 8, the highest level since April 15.

(An earlier version of this story was corrected to show the dollar fell against the euro.)

To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net

To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net Nicholas Reynolds, Keith Jenkins

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