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Yen Gains as Traders Cut Bearish Bets; Brazil Real Climbs

Dollar Advances to 2 1/2-Year High Versus Yen Before Goods Data
Euro, U.S. dollar and yen banknotes of various denominations are arranged for a photograph. Photographer: Kiyoshi Ota/Bloomberg

The yen rose against 14 of its 16 most-traded counterparts as investors reduced bets it would keep falling after sliding for the past 11 weeks in its longest losing streak on record.

Japan’s currency advanced from its weakest level versus the dollar since 2010 as technical indicators signaled it may have dropped too much. The pound fell to its lowest in more than 13 months versus the euro, while Brazil’s real climbed against the greenback. The dollar gained versus most major counterparts before Federal Reserve policy makers open a two-day meeting tomorrow and the U.S. issues a monthly jobs report Feb. 1.

“What we’re seeing is a little bit of consolidation and anticipation of activities coming during the week,” Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage, said in a telephone interview. “The dollar-yen won’t stray too far from current levels ahead of the Fed and payrolls on Friday.”

The yen appreciated 0.1 percent to 90.86 per dollar at 5 p.m. New York time, after declining earlier to 91.26, the weakest level since June 2010. It strengthened 0.1 percent to 122.25 per euro. The 17-nation currency slipped 0.1 percent to $1.3456 after reaching $1.3479 on Jan. 25, the strongest level since Feb. 29, 2012.

The Japanese currency fell 5.8 percent over the past month in the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 2.2 percent, and the dollar increased 0.2 percent.

Key Level

The euro may jump if it appreciates past $1.35, according to Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. The last time the shared currency traded at that level was Dec. 2, 2011.

“There seems to be no reason to pick a top to the euro’s strength,” Chandler said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee.

Traders expect the European currency to extend its rally against the dollar, according to Lloyds Banking Group Plc, citing derivatives measuring the difference between implied volatility on calls and puts. The 17-nation common currency has strengthened 2 percent this month, poised for a sixth-straight gain, the longest stretch since 2003.

One-month 25-delta risk reversals, a gauge demand for call relative to puts, reached 0.1, the highest since 2009, according to data compiled by Bloomberg. Calls grant the right, but not the obligation, to buy the underlying futures. Puts grant the right to sell them.

The euro will fall to $1.28 by the end of 2013, according to the median estimate of 59 economists surveyed by Bloomberg. The yen will trade at 90 by then, a separate survey showed.

Canadian Dollar

Canada’s dollar matched the lowest level since July against its U.S. counterpart before paring losses. Six Canadian lenders had their credit ratings cut by Moody’s Investors Service because of the nation’s high home prices and consumer debt. The currency was little changed at C$1.0063 after touching $1.0100, the weakest since July 27, for a second day.

Brazil’s real and the Swedish krona were the two biggest winners among the dollar’s most-traded peers.

The real rose to a more-than six-month high after the central bank auctioned foreign-exchange swap contracts to shore up the currency and contain inflation. The currency appreciated 1.7 percent to 1.9955 per dollar and touched 1.9945, its strongest level since July 3.

Krona Rises

Sweden’s krona gained against all of its major counterparts except the real as retail sales in the country increased 1.2 percent last month, easing pressure on the central bank to cut interest rates. The krona rose 0.6 percent to 6.4194 per dollar after touching 6.4110, its strongest since October 2011. The currency climbed 0.6 percent to 8.6374 per euro.

South Africa’s rand was the biggest loser as foreigners reduced holdings of the country’s assets on concern labor unrest and mining output cuts will weigh on the nation’s current-account deficit. The currency weakened 1.8 percent to 9.1054 per dollar and touched 9.1604, its lowest level since April 2009.

The yen’s 14-day relative strength index against the dollar was at 30.9, near the 30 level that some traders see as a signal an asset has fallen too far, too fast and may be due to reverse course. Against the euro, it was 29.9.

Once the yen’s exchange rate against the dollar gets “north of 90 to 91, the impetus, or the ability to break higher, will prove to be a little more compromised,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The combination of data points should be reasonably dollar-supportive.”

Durable Goods

Orders for durable-goods in the U.S. rose 4.6 percent in December after a 0.7 percent increase the prior month, Commerce Department data showed. The median forecast in a Bloomberg survey was a 2 percent gain. Pending U.S. home sales declined in December for the first time since August, falling 4.3 percent.

The pound depreciated 0.6 percent to 85.73 pence per euro and reached 85.87 pence, the weakest level since December 2011. Sterling dropped 0.7 percent to $1.5695 and touched $1.5675, the least since August. Home prices in England and Wales were unchanged from December, after declining for the previous six months, Hometrack Ltd. said today.

The U.S. Federal Open Market Committee opens a meeting tomorrow amid speculation it will begin to slow stimulus.

Employers in the U.S. added 160,000 jobs in January, after a 155,000 increase in December, a Bloomberg survey of economists showed before the Labor Department reports the data on Feb. 1.

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