The yen gained to a more than 11-year high against the euro as investors sought the perceived safety of the nation’s debt amid a deepening European crisis and slowing U.S. growth.
Japan’s currency strengthened against all its major counterparts for a second day as the premium investors receive for buying debt of the U.S., U.K. and Germany instead of Japanese securities fell. The euro rose from the weakest in almost two years versus the dollar as Spanish and Italian bonds rallied. Data showed the U.S. economic expansion slowed before tomorrow’s Labor Department payroll report.
“Dollar-yen is closely affected by the low level of Treasury yields,” said Kathy Lien, director of currency research with online currency trader GFT Forex in New York. “There has been a lot of demand for dollar-yen out of the Japanese postal system and individual banks so, yes, we’re getting quite a bit of liquidation today.”
The yen rose 1 percent to 96.84 to the euro at 5 p.m. New York time after touching 96.51, strongest since Dec. 1, 2000. Japan’s currency extended its gains against the euro to an eighth day, its longest losing streak since June 2010.
The yen gained 1 percent to 78.32 to the dollar. It touched 78.21, its strongest level since February, after rallying above the pair’s 200-day moving average. The shared currency was little changed at $1.2365 after touching $1.2337, the weakest level since July 2010.
Japan’s currency gained 1.9 percent versus the dollar this month and rose 8.4 percent against the euro. Japan’s currency typically strengthens in times of political, financial and economic turmoil because the nation’s historical trade surplus means it doesn’t have to rely on overseas lenders.
“If you’re going for big-picture levels -- ridiculously -- you will not find a major level until 89, which was posted in October 2000,” Tom Fitzpatrick, chief technical analyst at Citigroup Inc. in New York, said of euro-yen. “If you don’t think that dollar-yen has the ability to do more than 2 or 3 percent, then it would suggest we’re underestimating the level we’re going to get to in euro-dollar.”
The shared currency could drop to $1.17 in the next three weeks, Fitzpatrick said.
Spanish 10-year bond yields declined from a six-month high today even as ECB President Mario Draghi told a European Union Parliament committee the central bank cannot fill the “vacuum” of the lack of fiscal prudence and governance in the euro area. Policy makers will meet on June 6.
‘Flight to Safety’
“The market is really looking to policy makers for a response to the crisis, and they haven’t quite shown up yet,” said David Grad, a foreign-exchange strategist at Bank of America Corp. in New York. “The places where you see the yield lows are just reasserting where there is a perceived flight to safety still happening.”
The euro declined 7.1 percent versus the dollar this month, the most since September.
The 10-year Treasury yield fell to a record 1.5309 percent and the 10-year U.K. gilt yield declined to a record 1.563 percent as investors sought the relative stability of the nation’s debt. German 10-year bunds declined to a record 1.199 percent. Japanese securities of similar maturity fell four basis points, or 0.04 percentage point, to 0.815 percent.
The Standard & Poor’s 500 fell 0.2 percent and the S&P GSCI Index of 24 raw materials declined 1.2 percent.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was 0.1 percent stronger at 83.07 after touching 83.22, the most since September 2010. The gauge is weighted 57.6 percent to movements in the euro.
Gross domestic product rose at a 1.9 percent annual pace in the first quarter, down from a 2.2 percent prior estimate. The number of Americans applying for unemployment insurance payments rose last week to a one-month high.
The euro’s 14-day relative strength index against the dollar remained for an eighth day below the 30 level some traders see as signaling an asset may reverse declines. This is the longest period of being “oversold” since 2008.
The shared currency will fall below $1.20 before the Greek election on June 17, Adrian Schmidt, foreign-exchange strategist at Lloyds Banking Group Plc, wrote to clients today.
HSBC Holdings Plc cut its year-end forecast for the euro, predicting the 17-member currency will strengthen to $1.35 by the end of 2012, according to a report. HSBC previously said the euro would climb to $1.44, which was the most bullish among 57 financial companies surveyed by Bloomberg.
The bank still forecasts the euro will appreciate against the greenback this year, anticipating that Greece will remain in the euro, policy makers will act to support other high-deficit countries and the U.S. presidential election will highlight weakness in the nation’s finances, the report said.