The yen gained versus 10 of its 16 major peers as appetite for riskier assets cooled after China reported the biggest trade deficit in two years and the slowest rise in consumer prices in 13 months.
Sterling fell as Bank of England Deputy Governor Charlie Bean said further strength in the currency may hamper the U.K.’s economic recovery. Australia’s dollar dropped against most major peers after China, the nation’s biggest trade partner, said March 8 exports slid. Ukraine began military drills as Russian forces tightened their hold on the Crimean peninsula. A gauge of foreign-exchange volatility was at almost the lowest since 2012.
Markets are “slightly risk-off indeed, mostly on the back of weak China data over the weekend,” said Masafumi Takada, a director at BNP Paribas SA in New York. There’s “nothing really new on Ukraine stuff, but obviously yen is one of the few currencies you can buy in an uncertain market.”
The yen gained as much as 0.6 percent to 142.44 per euro before trading little changed at 143.30 at 5 p.m. in New York. The Japanese currency traded little changed at 103.26 per dollar, and climbed 0.5 percent to 93.14 per Australian dollar. Europe’s shared currency traded at $1.3875.
The Aussie dropped 0.5 percent to 90.23 U.S. cents after advancing to 91.33 cents on March 7, the strongest since Dec. 11. The pound weakened 0.4 percent to 83.37 pence per euro and fell 0.4 percent to $1.6645.
Deutsche Bank AG’s Currency Volatility Index, a gauge of future price swings, was at 7.28 percent after dropping to 7.25 percent on Feb. 25, the least since December 2012.
China’s exports unexpectedly fell 18.1 percent in February from a year earlier, customs data showed March 8, compared with a forecast for an increase of 7.5 percent in a Bloomberg News survey. Imports rose 10.1 percent, leaving a trade deficit of $23 billion, the report showed.
Consumer prices in the world’s second-largest economy rose 2 percent in February, the least since January 2013.
The People’s Bank of China cut the yuan’s reference rate by 0.18 percent, the most since July 2012. The currency declined 0.2 percent to 6.1385 per dollar, according to China Foreign Exchange Trade System prices.
“We’ve peeled back on the Aussie, but it hasn’t really fallen back that far,” said Steve Barrow, London-based head of Group-of-10 research at Standard Bank Plc. “In Europe, we’re seeing pretty low currency volatility and the markets seem quite hemmed in.”
The Aussie tumbled 14 percent in the past 12 months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted indexes, amid signs of a slowdown in China. The euro gained 6.9 percent, while the dollar declined 0.6 percent.
“AUD is trading lower in the wake of the disappointing trade release from China, likely reflecting fears on possible slowing in Chinese demand for Australian exports,” Todd Elmer, a Singapore-based currency strategist at Citigroup Inc., wrote in an e-mailed note to clients. “Chasing AUD weakness on the Chinese data may not be warranted,” he said, as the links between the nations’ economies may have weakened.
Mexico’s peso weakened from the strongest in seven weeks. The currency depreciated 0.2 percent to 13.215 per dollar after reaching 13.1091 on March 7, the strongest since Jan. 15.
The Bloomberg Dollar Spot Index rose for a second day amid speculation the world’s biggest economy is building momentum. The gauge, which tracks the greenback against 10 major counterparts, advanced 0.1 percent to 1,017.75. It fell to as low as 1,012.27 on March 7, the least since Dec. 11, before reversing losses after a U.S. jobs report.
The Labor Department data on March 7 showed U.S. employers added more workers in February than economists projected, indicating the economy is starting to recover from a weather-induced setback. The 175,000-job increase in employment compared with a forecast of 149,000 and followed a revised 129,000 gain in January.
U.S. retail sales increased 0.2 percent last month after a 0.4 percent drop in January, and an index of consumer confidence rose in March after declining in February, economists surveyed by Bloomberg forecast before data this week.
UBS AG Chairman Axel Weber said he expects the euro and yen to weaken against the dollar because the world’s three major central banks are on different paths.
The Bank of Japan, the European Central Bank, and the U.S. Federal Reserve have entered a “new phase,” Weber, a former president of Germany’s Bundesbank, said in an interview with Bloomberg Television. The Fed has started to allow interest rates to rise by reducing its bond purchases and will continue to do so, he said.
Weber said the U.S. will probably increase interest rates some time next year. UBS, Switzerland’s biggest bank, expects the euro to weaken against the dollar “in the long term,” according to Weber. The bank expects the yen to fall “strongly” against the dollar, he said.
The Fed is reducing bond purchases that were designed to hold down long-term borrowing costs, citing economic gains. Policy makers have cut the monthly buying to $65 billion this year, from $85 billion last year, and said the program may conclude by year-end if the economy continues to improve.
The U.S. central bank has kept its benchmark interest-rate target in a range of zero to 0.25 percent since 2008.
Ukraine’s armed forces are testing the combat-readiness of troops, the Defense Ministry said today on its website, reiterating the government’s desire for a peaceful end to the standoff in the former Soviet republic’s eastern provinces.
Russia, which has vowed to defend the ethnic Russians that dominate Crimea after an uprising in Kiev, accused Ukraine of ignoring radicals in the nation’s east.