The yen advanced for a third day against the dollar as signs that growth is slowing in China’s economy, the second-biggest in the world, boosted demand for haven assets.
New Zealand’s dollar rose versus all of its 16 major peers after the central bank raised interest rates in the first exit of record-low borrowing costs by a developed nation. The Swiss franc climbed to the strongest versus the dollar since 2011 before data tomorrow on Chinese retail sales and factory output. The franc and yen also rallied amid the standoff over Ukraine. Commodities fell. The euro approached the highest since 2011.
“China has been in the frame,” Alan Ruskin, the global head of Group of 10 foreign exchange at Deutsche Bank AG in New York, said in a telephone interview. “China is opaque in terms of what’s going on in the real economy. What isn’t opaque is when commodity prices, which are heavily influenced by China, go down.”
The yen gained 0.3 percent to 102.76 per dollar at 5 p.m. New York time after appreciating 0.2 percent yesterday. Japan’s currency was little changed at 142.86 per euro. Europe’s shared currency rose 0.3 percent to $1.3903 and touched $1.3914 after climbing on March 7 to $1.3915, the highest since October 2011.
The franc, like the yen a traditional haven currency, advanced 0.5 percent to 87.40 centimes to the greenback and touched 87.35, the strongest level since October 2011. It appreciated 0.2 percent to 1.2152 to the euro.
Deutsche Bank AG’s Currency Volatility Index, based on three-month implied volatility on nine major currency pairs, was at 7.18 percent, matching yesterday’s level, the lowest since December 2012.
Standard & Poor’s GSCI spot index of raw materials dropped as much as 1.1 percent before ending the day down 0.7 percent.
The Reserve Bank of New Zealand increased its key interest rate to 2.75 percent, from 2.50 percent, as forecast by all 15 economists in a Bloomberg survey. The nation’s currency, nicknamed the kiwi, rallied 0.6 percent to 85.24 U.S. cents, the highest level since Oct. 22.
The euro has gained 1.3 percent versus the dollar since March 5, the day before the European Central Bank kept its interest rates unchanged, undermining speculation policy makers would introduce further monetary stimulus. ECB President Mario Draghi said inflation is expected to rise gradually.
“People thought the disinflation story in Europe was going to lead to unorthodox policies from the ECB,” Deutsche Bank’s Ruskin said. “Once that’s been dispelled, pretty much ever since then it’s traded in very resilient fashion.”
Europe’s shared currency will rally versus the dollar to $1.5 dollar by the end of June, said Douglas Borthwick, the head of foreign exchange at Chapdelaine & Co. in New York.
“Peripheral European countries move their money into mainland Europe and the euro, not into the U.S. dollar,” he said. “The U.S. will not be raising rates any time soon, and will remain accommodative.”
The Federal Reserve, which meets next week, has kept its benchmark interest-rate target at zero to 0.25 percent since 2008 to support the U.S. economy.
The TAS PRO Navigator, a gauge of trends, divergences and potential reversal points, is approaching levels where the euro’s gains faded twice in the past five years, suggesting it may turn. The momentum line in the euro-dollar rate, calculated on a monthly basis, rose to a level of 5.97, data compiled by Bloomberg show. When the indicator reached 6.03 in August 2011, the euro went on to tumble 14 percent in about 11 months.
China’s exports unexpectedly fell 18.1 percent in February from a year earlier, customs data on March 8 showed, compared with a forecast for an increase of 7.5 percent in a Bloomberg survey. Imports climbed 10.1 percent, leaving a trade deficit of $23 billion.
“Investor concerns are continuing to build over slowing economic growth in China,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The risk is that we see more of a spillover and a shakeout in risk assets. Given the yen has been the main funding currency of the past year, there’s a risk that short positions could be unwound.” A short position is a bet an asset will fall.
The yen has strengthened 2 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The euro rose 0.5 percent, while the dollar fell 0.8 percent.
Turkey’s lira gained for the first time in four days after the nation’s current-account deficit narrowed in January from a year earlier as a weaker currency boosted exports. The lira slid 22 percent against the dollar in the 12 months through January, driven by a global investor exodus from emerging markets and political turmoil in Turkey.
The lira gained 0.6 percent today to 2.2322 per dollar. It was the best performance among the greenback’s 31 major counterparts and among 24 emerging-market currencies.
The Indian and Indonesian currencies fell versus most of the dollar’s 31 most-traded peers. Indonesia’s rupiah lost 0.3 percent to 11,425 per dollar, and India’s rupee fell 0.4 percent, its biggest drop on a closing basis since March 3, to 61.22 to the U.S. currency.
“Some of these countries needed a weaker currency to make sure they stayed competitive,” Jim O’Neill, Bloomberg View columnist and former chairman of Goldman Sachs Asset Management, said in an interview with Scarlet Fu and Tom Keene on Bloomberg Television. “Macro-policy wise, Indonesia and especially Rajan, central bank governor of India, these guys are doing a better job.” Raghuram Rajan is governor of the Reserve Bank of India.
President Barack Obama called Russia’s incursion into Crimea a violation of international law and told Ukrainian Prime Minister Arseniy Yatsenyuk that the U.S. stands with his country to protect its sovereignty and territory. Yatsenyuk, who met with Obama at the White House, said he’ll “never surrender.”
Russia has stood by deposed Ukrainian President Viktor Yanukovych and called possible U.S. aid to the new government in Kiev illegal. Russia considers the ousting of Yanukovych by Ukrainian lawmakers a coup.