The yen rose by more than one percent against all of its 16 most-traded peers tracked by Bloomberg as weaker factory data in Europe and China spurred concern economic growth was slowing, boosting safety demand.
The yen surged by the most since August against the dollar after Japan reported an unexpected trade surplus for last month, adding to evidence of a rebound in the economy. Australia’s currency slid to its weakest in two months and Sweden’s krona dropped by the most among the major currencies after a private report showed manufacturing may shrink in China for a fifth month. The dollar rose as jobless claims dropped.
“There was disappointing data out of China and the euro-zone data was also much weaker than expected, so that’s also a cause for concern and why we’re seeing a flight to safety throughout markets,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. “The weak jobless claims contrasted with worsening economic news abroad and that’s why we’re seeing the dollar remain pretty well supported.”
The yen strengthened 1 percent to 82.54 per dollar at 5 p.m. in New York, the biggest gain on a closing basis since Aug. 26. The Japanese currency added 1.2 percent against the euro to 108.95. The dollar rose 0.1 percent to $1.3201 per euro.
The Canadian dollar fell for a third day, to as low as parity, versus the greenback after a report showed January retail sales grew at less than a third of the rate economists expected.
Retail sales in Canada expanded 0.5 percent in January, Statistics Canada said today in Ottawa. That was less than the 1.8 percent median projection of 24 forecasts compiled by Bloomberg.
Canada’s dollar fell 0.7 percent to 99.93 Canadian cents per U.S. dollar, reaching C$1.0008. It lost 1.7 percent to 82.60 yen.
The yen headed for its first five-day advance in seven weeks against the dollar after Japan’s finance ministry reported exports exceeded imports by 32.9 billion yen ($396 million) in February. Economists surveyed by Bloomberg had predicted a shortfall of 120 billion yen. Exports fell by 2.7 percent from a year earlier, less than the 6.5 percent drop projected.
“The data suggest that Japan’s economy is doing better,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “From a fundamental perspective, this is likely to be positive for the yen.”
JPMorgan Chase & Co. said a short-term retracement of yen declines against the dollar may be due after yesterday’s so-called “bearish reversal” in which the greenback failed to advance above a key resistance area.
“We continue to monitor the 82.85/65 support zone for confirmation of that retracement,” Niall O’Connor, a New York-based technical analyst at JPMorgan, wrote in a note to clients today. A resistance level is an area on a chart where analysts anticipate orders to sell a currency will be grouped and a support level is an area where they expect buy orders to be clustered.
Australia’s currency dropped for a third day after a preliminary reading of an index from HSBC Holdings Plc and Markit Economics showed Chinese manufacturing may contract. The gauge fell to 48.1 in March, the lowest level in four months and compared with a final reading of 49.6 for February. Figures below 50 indicate contraction.
The Australian dollar slid 0.7 percent to $1.0389 after falling to $1.0336, the lowest since Jan. 17. It fell 1.7 percent to 85.74 yen. New Zealand’s currency declined 0.8 percent to 80.94 U.S. cents and weakened 1.8 percent to 66.80 yen.
China is Australia’s biggest trading partner and New Zealand’s second-biggest export destination.
Implied volatility of three-month options of Group of Seven currencies rose to 10.39 percent after touching 9.91 percent on March 20, its lowest level since Feb. 27, according to JPMorgan’s G7 Volatility Index.
Intercontinental Exchange Inc.’s Dollar Index, used to track the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, was little changed at 79.652 after touching 79.315 yesterday, the lowest level since March 9.
Applications for unemployment benefits in the U.S. dropped last week to the lowest level in four years, reinforcing signs the U.S. labor market is picking up. Jobless claims decreased by 5,000 to 348,000 in the week ended March 17, the fewest since February 2008, Labor Department figures showed today.
“In the past six weeks, the new characteristic is that the dollar has gone up while the U.S. equity market has gone up,” Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc., said in a Bloomberg Radio interview on “Bloomberg Surveillance” with Ken Prewitt and Carol Massar. “That’s a reflection that U.S. growth is standing out if you compare to Europe and other Group of 10 economies.”
Since the 2008 financial crisis, the dollar has tended to weaken during periods of increased economic optimism as the sentiment spurred risk demand. That relationship is breaking down, with the 60-day percent-change correlation between the Dollar Index and the Standard & Poor’s 500 Index at minus 44 percent today from as low as minus 85 percent in December. A reading of minus 100 percent means that the two assets always move in the opposite direction.
A euro-area composite index based on a survey of purchasing managers in manufacturing and services dropped to 48.7 from 49.3 in February, London-based Markit Economics said in an initial estimate today. Economists forecast a gain to 49.6, according to the median of 21 estimates in a Bloomberg News survey. A reading below 50 indicates contraction.
“The euro-zone data was disappointing in the sense that it gives maybe the first indication that really the kind of improvement that we’ve seen in the euro-zone economy is really a myth,” said Steven Barrow, an analyst at Standard Bank Plc in London.
The euro has weakened 3 percent during the past six months against the currencies of its nine developed-nation counterparts, according to Bloomberg Correlation-Weighted Indexes. The dollar fell 0.9 percent and the yen lost 10.3 percent.