The yen reached the weakest level in four months against the dollar as investors speculated the Bank of Japan will expand monetary stimulus next week.
The dollar pared losses against major peers after weaker-than-forecast data on the economy and amid speculation Fitch Ratings would cut the U.S. credit ranking. South Africa’s rand rallied as the nation got a new budget that for the first time since 1998 didn’t raise three-year spending targets. The pound jumped versus the euro as Britain emerged from its recession more strongly than economists forecast.
“Markets tend to price easing in beforehand and if it comes in as expected, it’s a situation where you buy the rumor, sell the fact,” said Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York. “Easing is a good reason to sell the yen going into the BOJ meeting. The U.S. data today was weaker than expected, and the trend doesn’t look great.”
The yen dropped 0.6 percent to 80.30 per dollar at 5 p.m. New York time and reached 80.34, the weakest level since June 25. It depreciated 0.3 percent to 103.86 per euro. The 17-nation currency lost 0.3 percent to $1.2934 after rising 0.4 percent earlier. It slid yesterday to $1.2921, the lowest since Oct. 15.
Japan’s currency dropped versus the greenback as yields on U.S. Treasury two-year notes yielded the most since April compared with their Japanese counterparts, making the American securities more attractive. U.S. two-year notes yielded 0.31 percent, 21 basis points, or 0.21 percentage point, more than comparable Japanese government debt.
The Dollar Index rose as the U.S. currency’s haven appeal increased amid speculation on Fitch and as U.S. stocks pared gains. The gauge, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major trading partners, advanced 0.3 percent to 80.116 after declining 0.3 percent earlier.
There was “a Fitch-related spike into the dollar as risk appetite came off,” said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. LLC in New York.
Fitch said subsequently its negative outlook on the U.S.’s AAA credit ranking is still unlikely to change before late 2013 as it waits to assess any deficit-reduction plans following this year’s elections.
Brian Bertsch, a Fitch spokesman in New York, said in an e-mail today to Bloomberg News that anyone who has questions about the status of the rating should review the statement put out by the company in July, when it made the forecast.
The Standard & Poor’s 500 Index was up 0.3 percent after climbing as much as 0.9 percent earlier amid better-than-estimated financial results from companies including Procter & Gamble Co., the world’s largest consumer-products maker, and Aetna Inc., the third-biggest U.S. health insurer.
U.S. reports on pending home resales and capital-goods orders trailed estimates in Bloomberg News surveys. The home sales rose 0.3 percent in September from August, National Association of Realtors data showed, versus a forecast gain of 2.5 percent. Bookings for non-defense capital goods excluding aircraft were little changed, the Commerce Department said. The forecast was for a 0.8 percent increase.
America’s gross domestic product rose at a 1.8 percent annualized pace in the third quarter after expanding at a 1.3 percent rate in the second, economists in a Bloomberg survey forecast before the Commerce Department issues the data tomorrow. It would be the first back-to-back readings below 2 percent since the U.S. was emerging from the recession in 2009.
South Africa’s rand rallied 0.5 percent to 8.7425 per dollar after Finance Minister Pravin Gordhan announced a budget designed to restrain spending over the next three years to help restore confidence in Africa’s largest economy.
The finance chief ordered government departments to cut back on wasteful expenditure as rising debt levels put the nation under increased scrutiny from rating companies following the first downgrades since the end of apartheid.
The Bank of Japan will release a forecast for the nation’s consumer prices and growth on Oct. 30, when it holds its second policy meeting this month.
“We’re seeing yen weakness today because there is this expectation of easing from the BOJ,” said Eimear Daly, a currency market analyst at Monex Europe Ltd. in London who expects the yen to trade at 80 versus the dollar by year-end. “However, I don’t think that will bear out.”
Economy Minister Seiji Maehara, who has been calling for more action from the central bank, said earlier this week he may attend the meeting. He was present at the central bank’s previous gathering, the first minister to do so for more than nine years.
Nikkei said the BOJ may increase its asset-purchase target by 10 trillion yen ($125 billion) to 90 trillion yen.
The euro may continue to appreciate against the Japanese currency after holding above a support level of 102.83 yen to 102.99, Cilline Bain, a London-based technical analyst at the Credit Suisse AG, wrote today in a client note. If the euro exceeds the 104.62- and 105.43-yen levels, it may climb to 107.74, which would be its highest since April 23, Bain said.
Support is an area on a technical chart where buy orders may be clustered.
The yen weakened 2.9 percent in the past month, the biggest decline among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro climbed 1.1 percent and the dollar appreciated 0.6 percent.
Sterling added 0.5 percent to $1.6118 and strengthened 0.8 percent to 80.24 pence per euro.
U.K. gross domestic product rose 1 percent from the three months through June, the fastest expansion in five years, the Office for National Statistics said in London today. That exceeded the highest estimate in a Bloomberg News survey for growth of 0.8 percent.