The yen and dollar slid against currencies of commodity-exporting nations including New Zealand and South Africa as investors sought higher-yielding assets and gold and U.S. stocks gained.
Japan’s currency dropped versus all of its 16 most-traded peers as investors bet a rally yesterday amid demand for a haven was excessive. The euro climbed to a seven-week high versus the greenback as two regional Federal Reserve Bank presidents said the U.S. still needs monetary stimulus. Mexico’s peso gained versus all of its major counterparts.
“There’s some better risk sentiment in the market,” Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York, said in a telephone interview. “Part of it is correcting the weakness we saw yesterday. Equity markets are performing relatively well today.”
New Zealand’s dollar, nicknamed the kiwi, strengthened 1 percent to 84.92 U.S. cents at 5 p.m. New York time and rallied 1.8 percent to 82.84 yen. The Reserve Bank of New Zealand’s official cash rate is 2.5 percent, compared with as low as zero in the U.S. and Japan.
The yen sank 1.9 percent to 128.52 per euro after jumping 3.5 percent during the previous two days. Japan’s currency dropped 0.8 percent to 97.54 per dollar. The greenback fell 1.1 percent to $1.3177 per euro and touched $1.3202, the weakest since Feb. 25. The U.S. currency gained 0.6 percent yesterday against the euro.
Mexico’s peso gained 1.1 percent to 12.1462 per dollar. The nation’s benchmark interest rate is 4 percent.
South Africa’s rand strengthened for the first time in three days, rebounding from the biggest one-day slump in six months, as metal prices rallied and investors gauged the currency’s decline was overdone. It appreciated 0.9 percent to 9.1253 per dollar and climbed as much as 1.1 percent, its biggest intraday increase since April 8. The rand slid 2.8 percent yesterday, the most since Oct. 5.
Gold for immediate delivery climbed as much as 4.1 percent to $1,403.48 an ounce before trading at $1,367.36, up 1.4 percent. The price tumbled 9.1 percent yesterday, the biggest decline since 1983. The Standard & Poor’s 500 Index gained 1.4 percent, the most since Jan. 2. The equity benchmark index plunged 2.3 percent yesterday, its largest drop since Nov. 7.
“It’s a typical retracement after a very sharp move lower in dollar-yen and gold,” Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York, said in a telephone interview. “We’re definitely moving back to the risk-on, risk-off theme for the time being.”
The yen and the dollar surged yesterday after China’s economic growth slowed more in the first quarter than economists forecast, fueling demand for refuge assets.
Sterling fell today to the weakest level in a month against the euro after a report showed consumer-price inflation stayed above the Bank of England’s 2 percent target at the same time as growth stagnates. The pound weakened 0.6 percent to 85.78 pence per euro after touching 86.02, the least since March 15. The currency appreciated 0.5 percent to $1.5362.
The dollar fell against the euro as Chicago Fed Bank President Charles Evans said the U.S. economy still needs monetary stimulus, and New York Fed President William C. Dudley said a March slowdown in employment growth highlighted the need to maintain the current pace of bond purchases. Evans gave a speech in Chicago, and Dudley spoke in Staten Island, New York.
The Fed is buying $85 billion of bonds each month until it sees significant improvement in the labor market. Jobs growth unexpectedly slowed last month, Labor Department data showed April 5, as payrolls added 88,000 workers, less than half the 190,000 forecast in a Bloomberg survey.
A government report today indicated that inflation in the U.S. is being contained, giving the Fed more room for stimulus.
The U.S. consumer-price index fell 0.2 percent last month, Labor Department figures showed. For the 12 months that ended in March, consumer prices increased 1.5 percent, the smallest gain since July. The central bank’s inflation target is 2 percent.
The decline in CPI came as gold has slid from a price of more than $1,600 an ounce as recently as April 2. Some investors buy the precious metal as a hedge to protect against inflation.
The greenback dropped 0.7 percent in the past month against nine developed-nation peers monitored by Bloomberg Correlation-Weighted Indexes. The yen fell 3.3 percent, making it the worst performer, while the euro gained 0.2 percent.
Options traders raised bets on yen volatility amid speculation Japan will face pressure from Group of 20 peers over policies that have weakened its currency.
One-week implied volatility for the dollar-yen rate, based on currency option prices, increased 11 basis points, or 0.11 percentage point, to 13.4 percent. The measure has averaged 12.8 percent this year.
The Japanese currency may weaken to 100 at some point in May, Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London, said in an interview on Bloomberg Television’s “Countdown” with Mark Barton and Anna Edwards.
The yen slid last week to 99.95 to the dollar, the weakest level since April 2009, following the Bank of Japan’s announcement on April 4 of unprecedented stimulus measures.
The BOJ said it would increase bond purchases and double the nation’s monetary base by the end of 2014 as it fights deflation. The central bank’s current-account balance increased to a record 61.4 trillion yen ($628 billion) yesterday, the BOJ said today.