Yen Trades Near 6-Week High Versus Euro on Growth Concern

Yen Trades Near 6-Week High Against Euro
Japanese 10000 yen notes are displayed for a photograph in Tokyo, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

The yen traded 0.4 percent from the strongest level in six weeks against the euro as signs global growth is slowing boosted demand for haven assets.

China’s economy expanded by less in the second quarter than the median estimate of economists in Bloomberg News survey. Australia’s dollar rose as Asian stocks rallied following the data from China, the South Pacific nation’s biggest trading partner. The euro was 0.4 percent from a two-year low against the dollar after Moody’s Investors Services cut Italy’s bond rating before the nation sells debt today.

“It’s just confirmation that the risks to global growth are tilted to the downside,” Sacha Tihanyi, a strategist in Hong Kong at Scotiabank, a unit of Bank of Nova Scotia, said in reference to China’s gross domestic product figures. “There’s still some support for the yen and dollar.”

The yen was little changed at 96.78 per euro as of 6:31 a.m. in London from yesterday, when it reached 96.43, the strongest level since June 1. Japan’s currency is set for a 1.1 percent gain this week against the euro. The yen traded at 79.27 per dollar from 79.31 yesterday, when it advanced 0.6 percent. It’s poised for a 0.5 percent weekly gain.

The euro bought $1.2210 from $1.2203 yesterday, when it touched $1.2167, the least since June 2010. The Australian dollar climbed 0.3 percent to $1.0173.

China Growth

China’s GDP expanded 7.6 percent last quarter from a year earlier, the National Bureau of Statistics said in Beijing today. The pace, the slowest in three years, was still above the estimates of 12 of the 38 economists surveyed by Bloomberg.

The MSCI Asia Pacific Index of stocks rose 0.5 percent, trimming its weekly decline to 2.8 percent.

The yen was set to gain versus all 16 of its major peers this week after Singapore’s economy unexpectedly contracted last quarter and ahead of a report forecast to show U.S. consumer confidence stagnated.

Singapore’s gross domestic product fell an annualized 1.1 percent last quarter, according to a government report today. The figure compares with estimates for a 0.6 percent rise. The country’s bonds advanced, pushing yields down to a record. The local dollar was little changed at $1.2700.

In the U.S., the Thomson Reuters/University of Michigan final index of sentiment probably rose to 73.5 this month from 73.2 in June, the lowest this year, according to the median forecast of economists surveyed by Bloomberg before the release of the data today.

The Bloomberg Consumer Comfort Index held at minus 37.5 in the week ended July 8. Some 86 percent of those surveyed said the economy was in bad shape, 21 percentage points higher than the average since 1985.

Yen Haven

Japan’s currency tends to strengthen during periods of financial and economic turmoil because the nation’s current-account surplus means it isn’t reliant on foreign capital.

The yen gained 6.3 percent in the past three months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 3.9 percent, while the euro dropped 3.8 percent.

Italy will sell bonds maturing in 2015, 2019, 2022 and 2023 today. Moody’s cut its debt rating to Baa2 from A3. That makes the country’s grade the same as those of Kazakhstan, Bulgaria and Brazil, according to data compiled by Bloomberg.

Italy’s downgrade by Moody’s may pave the way for “massive selling” of the nation’s bonds, according to Shinji Kunibe, chief portfolio manager for fixed-income investment in Tokyo at Nissay Asset Management Corp., which oversees the equivalent of $69 billion. “I have an underweight bias on the euro.”

More Leeway

Italian Prime Minister Mario Monti has been lobbying European partners to agree on a plan to give the region’s permanent bailout fund more leeway to buy the bonds of countries meeting their fiscal goals. He wants the the European Stability Mechanism to purchase the debt of nations including Italy and Spain to lower their yields.

The rate on Italy’s 10-year debt added 10 basis points, or 0.10 percentage point, to 5.91 percent yesterday after reaching 6.22 percent on June 13, the highest close since Jan. 25.

“Italy’s downgrade brings the market’s attention back to the risks surrounding the European debt crisis,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The euro will continue to decline on its own.”

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