Yen Set for Gain as Stock Declines Boost Safety Demand

German Chancellor Merkel and French President Hollande
Germany's chancellor Angela Merkel and France's president Francois Hollande. Photographer: Sean Gallup/Getty Images

The yen gained versus most of its 16 major peers this week as declines in Asian stocks and weakening global economic data boosted demand for haven assets.

Japan’s currency headed for its biggest five-day advance against the dollar in 12 weeks after reports yesterday showed U.S. jobless claims increased while manufacturing gauges in Europe and China signaled contraction. Australia’s dollar touched a one-month low versus its New Zealand counterpart after Reserve Bank Governor Glenn Stevens said the bigger nation’s currency would probably fall if a mining boom ends.

“There are still concerns about the global economy,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. Investors are “selling currencies against the yen.”

The yen fetched 78.59 per dollar at 7:06 a.m. in London from 78.49 yesterday. It was at 98.67 per euro from 98.62. Europe’s shared currency bought $1.2555, from $1.2564 at the close in New York.

The yen has strengthened 1.2 percent since Aug. 17 versus its U.S. peer, the biggest advance since the period ended June 1. The euro has gained 1.8 percent, the most since the five days through Feb. 24.

The MSCI Asia Pacific Index of shares lost 1.1 percent today.

A preliminary reading yesterday of a manufacturing purchasing managers’ index for China by HSBC Holdings Plc and Markit Economics showed the gauge was at 47.8 this month, after a final figure of 49.3 last month. If confirmed, the August figure would extend to 10 months the longest run of readings below 50, the dividing line between contraction and expansion, in the index’s eight-year history.

Europe Slowdown

This month’s reading for a similar measure in the euro area, released by Markit Economics yesterday, was at 45.3, indicating the 13th-straight period of contraction.

Greek Prime Minister Antonis Samaras will meet German Chancellor Angela Merkel today and travel to Paris tomorrow for talks with French President Francois Hollande.

“It’s important to me that we all stand by our obligations and wait for the troika report and see what the result is,” Merkel said in a prepared statement late yesterday before hosting the French leader, referring to a report from the European Commission, European Central Bank and International Monetary Fund due next month on Greece’s progress in meeting its bailout terms.

“We, and I, will encourage Greece to pursue the path of reform that demands a lot from the people,” Merkel said.

Jobless Claims

The U.S. Labor Department said yesterday applications for unemployment benefits rose by 4,000 for a second week to reach 372,000 in the period ended Aug. 18. A Commerce Department report today may show orders for durable goods probably climbed 2.5 percent last month, according to the median estimate of economists surveyed by Bloomberg News. That would be the biggest increase since December.

Minutes of the Fed’s latest policy meeting released this week showed officials remain supportive of a third round of asset purchases under quantitative easing, or QE, as unemployment has been mired at more than 8 percent since 2009. Policy makers will next meet on Sept. 12-13.

St. Louis Fed President James Bullard said in a CNBC interview yesterday that recent signs of improvement in the economy would prompt him to oppose any new program by the Fed to buy bonds to reduce borrowing costs. Chicago Fed President Charles Evans endorsed more accommodation in a separate interview on CNBC.

Best Performer

The yen has advanced 6.5 percent in the past six months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 2.7 percent, while the euro declined 4.9 percent in the same period.

Australia’s dollar headed for a drop versus most of its peers this week after RBA head Stevens said in testimony to a parliamentary panel today that the nation’s resource investment boom will peak “within the next year or two.”

The so-called Aussie fell 0.2 percent to NZ$1.2822 after earlier touching NZ$1.2820, the weakest since July 12.

Australia’s currency was little changed at $1.0439. Should it fall below the support area at $1.0411 to $1.0413, it “will likely have strong bearish implications going forward,” Skandinaviska Enskilda Banken AB analysts Anders Soderberg and Dag Muller wrote in a research note today. Support is an area on a chart where buy orders may be clustered. The $1.0413 level was last seen as the low reached on Aug. 22, according to data compiled by Bloomberg.

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