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Yen Remains Higher as Global Weakness Boosts Safety Bid

Romney Weakens Yen as Fed View Widens U.S.-JGB Gap
Presidential Candidate Mitt Romney’s criticism of U.S. monetary easing is helping drive Treasury yields higher relative to Japan’s, weakening the yen. Photographer: Kiyoshi Ota/Bloomberg

The yen remained higher after its biggest one-day gain in two months against the dollar as signs of global economic weakness increased demand for haven assets.

Japan’s currency extended last week’s advance versus the euro as Hurricane Sandy shut stock markets in the U.S. and before reports tomorrow that may show Spain’s gross domestic product shrank and Germany’s jobless rate rose. Data this week may indicate U.S. unemployment climbed in October. The Bank of Japan is scheduled to meet tomorrow after holding off from easing policy on Oct. 5. The Australian dollar weakened along with Asian shares.

“Appreciation pressure will remain for the yen,” said Hitoshi Asaoka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s third-largest financial group by market value. “The euro region’s economy is bad with no sign of picking up.”

The yen traded at 79.61 per dollar as of 8:49 a.m. in London after rising 0.8 percent on Oct. 26, the largest gain since Aug. 22 on a closing price basis. It climbed 0.3 percent to 102.71 per euro, after strengthening 0.2 percent last week. Europe’s shared currency dropped 0.3 percent to $1.2901.

The U.S. securities industry canceled equity trading on all markets today as Hurricane Sandy headed toward New York City. The shutdown, announced by the Securities and Exchange Commission, may extend through Oct. 30 and followed an earlier decision by the New York Stock Exchange to close floor trading.

Global Data

The Spanish economy shrank 0.4 percent in the three months ended Sept. 30 from the previous quarter, according to the median estimate of 19 economists surveyed by Bloomberg News before preliminary government data tomorrow.

Germany’s unemployment rate climbed to 6.9 percent this month from 6.8 percent in September, another poll showed ahead of tomorrow’s release. That would be the first gain since June 2009. The U.S. jobless rate rose to 7.9 percent this month even as employers are projected to have added 125,000 workers to payrolls, according to separate surveys before the figures are released on Nov. 2.

The yen was also supported as Asian stocks reversed gains made earlier today. The MSCI Asia Pacific Index of shares dropped 0.2 percent after climbing as much as 0.3 percent.

The area between 79.47 and 79.05 on the dollar-yen chart “will act as key support and define whether a deeper retracement can develop,” Niall O’Connor, a New York-based technical analyst at JPMorgan Chase & Co., wrote in a note to clients yesterday. Support refers to an area where orders to buy may be clustered.

No Restructuring

The euro pared a monthly advance as German Finance Minister Wolfgang Schaeuble rejected another debt restructuring for Greece. After agreeing to the biggest-ever write-off on private bondholders, it would be “a bit unrealistic” to impose more losses on them, Schaeuble said in an interview with German radio Deutschlandfunk broadcast yesterday.

European policy makers are awaiting a report on Greece’s progress in meeting internationally agreed targets compiled by the troika of the European Commission, the European Central Bank and the International Monetary Fund.

The euro strengthened 1.3 percent in the past month, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen fell 1.5 percent, while the U.S. dollar gained 0.9 percent.

BOJ Pressure

BOJ board members are facing political pressure to ease policy as data last week showed consumer prices fell for a fifth-straight month, making the central bank’s 1 percent inflation goal elusive. All but one of 27 economists surveyed by Bloomberg expect officials to increase stimulus tomorrow.

“Market participants see an increase of about 10 trillion yen” in the BOJ’s asset-purchase program at the meeting, said Daisaku Ueno, a senior foreign-exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “The yen may momentarily weaken if the BOJ does take such a step.”

Figures from the Commodity Futures Trading Commission showed futures traders reversed bets that the yen will gain against the dollar.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen versus the dollar compared with those on a gain -- so-called net shorts -- was 18,196 on Oct. 23. That compares with net long positions of 10,086 in the previous period. The last time traders reversed their bets to a drop in the currency from an advance was in the week ended Feb. 28, according to the data.

Aussie Slips

The Australian dollar slid as polls tightened before the U.S. presidential election between incumbent Barack Obama and Republican challenger Mitt Romney.

“If we get polls that still show that Romney and Obama look to be pretty neck-and-neck, then I think that leads to uncertainty,” said Ray Attrill, Sydney-based global co-head of currency strategy at National Australia Bank Ltd. “There is potential for some negative price action in the risk market. In that case I can see the Aussie heading back down towards $1.03.”

Australia’s currency slid 0.2 percent to $1.0354 after climbing 0.4 percent in the five days ended Oct. 26, its third-straight weekly advance.

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