The yen gained against the majority of its 16 most-traded peers as investors bet the financial turmoil that has weighed on emerging-market assets in August has longer to run, fueling demand for Japan’s currency as a haven.
The yen strengthened versus all but one of its major counterparts this week amid the threat of U.S.-led military action against Syria. The euro fell to a one-month low versus the dollar. Norway’s krone weakened for third day against the U.S currency after retail sales fell last month and unemployment climbed in August. India’s rupee recorded its biggest monthly loss in 20 years on concern a deepening economic slowdown will deter investors.
“Given the situation in Syria, a lot of people are on the sideline,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in a telephone interview. “But there’s an interest in turning more bullish on dollar-yen. We’re seeing rebuilding in dollar-yen positions.”
The yen rose 0.3 percent to 129.80 per euro at 5 p.m. in New York, having appreciated 1.8 percent this week. Japan’s currency advanced 0.2 percent to 98.17 per dollar after earlier gaining as much as 0.5 percent. The dollar climbed 0.1 percent to $1.3222 per euro after touching $1.3174, the strongest level since July 25.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 other major currencies, rose 0.1 percent to 1,034.28. It gained 0.8 percent in August, the largest monthly gain since May.
U.S. financial markets will be shut Sept. 2 for Labor Day.
The currencies of India, Mexico and Turkey have all slid more than 2 percent against the dollar this week as speculation the U.S. Federal Reserve will dial back its monetary stimulus sapped demand for higher-yielding assets, and the prospect of expanded conflict in the Middle East damped risk-taking.
Fed policy makers are debating whether the economy is strong enough to allow them to pare monthly purchases of $85 billion in Treasuries and mortgage debt, which tend to debase the dollar. Officials will reduce the amount at their next meeting on Sept. 17-18, according to 65 percent of economists in an Aug. 9-13 Bloomberg survey.
“This week has been obviously risk-off, calibrated by a stern speech in regards to Syria,” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc., said in a phone interview. “Demand for yen was higher earlier in the week.”
India’s rupee gained 1.3 percent to close at 65.705 per dollar in Mumbai after slumping to a record 68.8450 on Aug. 28. The currency has declined 8.1 percent this month, the most since March 1992. The Indonesian rupiah fell 8.3 percent, the biggest decline among 31 most-traded currencies, while Turkey’s lira dropped 5.1 percent and Mexico’s peso fell 4.8 percent.
India is liaising with other emerging markets on a plan to coordinate offshore currency interventions, Reuters reported, citing Dipak Dasgupta, India ministry’s principal economic adviser. Brazil central-bank’s press officer Gustavo Paul later said “there is no initiative of that sort.”
The krone dropped versus all except two of its 16 major counterparts today after Statistics Norway said retail sales excluding motor vehicles slumped 1.3 percent in July.
Seasonally adjusted unemployment climbed to 70,210 this month from 69,284 in July, according to the Norwegian Labor and Welfare Service.
The krone weakened 0.2 percent to 8.0856 per euro and dropped 0.4 percent to 6.1158 per dollar.
Europe’s shared currency, which dropped 1.2 percent to the greenback this week, may weaken to a nine-month low, MacNeil Curry, New York-based chief rates and currencies technical strategist at Bank of America’s Merrill Lynch unit, wrote in a report today.
“While we have been and remain U.S. dollar bulls, we have NOT been euro-dollar bears,” Curry wrote. “That is changing.”
A close below $1.3206 would target in the next few weeks a range of $1.2760-$1.2680, a level last reached in November. At the same time, the dollar may strengthen to as high as 109.8 yen, Curry said.
A U.S. intelligence assessment has concluded with “high confidence” that the Syrian regime carried out a chemical attack that killed 1,429 people earlier this month in a Damascus suburb, Secretary of State John Kerry said at the State Department as the four-page report was released.
France signaled it might act as the principal U.S. ally in an attack against Syria, filling a hole left after British lawmakers pulled the U.K. out of military action.
“The general concerns about emerging markets haven’t gone away,” said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in London. “As long as risk is off, the yen could strengthen further on unwinding of short positions. The fire is still burning and it appears that the cycle is not over yet.”
The yen strengthened 1.7 percent this week, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 1 percent, while the euro slipped 0.3 percent.
Trading in over-the-counter foreign-exchange options totaled $15 billion, from $17 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $2.6 billion, the largest share of trades at 18 percent. Options on the U.S.-Singapore dollar rate totaled $1.9 billion, or 13 percent.
Dollar-yen options trading was 43 percent less than the average for the past five Fridays at a similar time in the day, and Singapore dollar-greenback trading was 583 percent more, according to Bloomberg analysis. Dollar-Indian rupee options trading, at $478 million, was 926 percent above average.
Traders increased bets the yen will weaken, according to data from the Commodity Futures Trading Commission. The difference in the number of wagers by hedge funds and other large speculators on a decline in the currency compared with those on a gain -- so-called net shorts -- was 78,353 on Aug. 27, compared with 71,721 a week earlier.