Yen Strongest in Week as Ukraine Boosts Haven Demand; Kiwi Falls

The yen reached the strongest level in a week against the dollar as a flareup in tensions between Russia and Ukraine stoked investor demand for safety.

The dollar climbed earlier to the highest level in two weeks against a basket of peers after U.S. durable goods orders rose more than forecast in March. The euro erased advances against the greenback and the yen after European Central Bank President Mario Draghi said slowing inflation may trigger asset purchases. New Zealand’s dollar reversed initial gains after the central bank raised its benchmark rate for a second month.

“Safety flows have been the overriding theme today because of intensifying risks in Ukraine,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. “I can see Ukraine being the market’s concern over the future.”

The yen gained a second day, advancing 0.2 percent to 102.32 per dollar at 5 p.m. in New York after touching 102.09, the strongest level since April 17. It added 0.1 percent to 141.51 per euro. The 18-nation shared currency climbed 0.1 percent to $1.3831 after falling 0.2 percent earlier.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, was little changed at 1,011.04 after touching 1,012.74, the highest since April 8.

Kiwi, Yuan

New Zealand’s dollar dropped against most of its 16 major peers, reversing initial gains, after the first developed nation to start raising rates this year also boosted its estimate for growth in the year ended March 31.

The kiwi, as the currency is known, fell 0.2 percent to 85.67 U.S. cents after climbing as much as 0.6 percent.

It may be poised for a 25 percent to 30 percent drop versus the greenback in the next year, Paul Robson and David Simmonds, currency strategists in London at Royal Bank of Scotland Plc, wrote in a client note today.

A manufacturing report out of China, New Zealand’s biggest trading partner, showed the industry contracted for a fourth month.

The yuan dropped 0.18 percent, the biggest decline in two weeks, to close at 6.2489 per dollar. It touched 6.2509 earlier today, the weakest since Dec. 12, 2012.

The lira appreciated the most in more than two weeks, advancing against all 23 emerging-market peers, after Turkey’s central bank resisted government pressure to cut interest rates.

The currency gained 0.7 percent to 2.1356 per dollar after adding 1.1 percent, the biggest advance since April 8. It has strengthened 9.4 percent in the past three months, the most among the emerging-market currencies.

Putin Warning

The yen strengthened against 15 of its 16 major peers as Russian President Vladimir Putin warned Ukraine against continuing its offensive against separatists after government troops killed five rebels and Russia’s military began new drills on the two nations’ border.

“If it’s true that the current regime in Kiev sent the army against citizens inside its country, then it is a very serious crime against its own nation,” Putin said in St. Petersburg.

The yen gained also as prices in Tokyo excluding fresh food climbed 2.8 percent in April from a year earlier, the most since April 1992, according to a Bloomberg News survey of economists. The inflation rate was 1 percent in March. Japan raised its consumption tax on April 1 to 8 percent from 5 percent, the first increase since 1997.

Inflation, Growth

The Bank of Japan announces its next decision on April 30, along with inflation and economic growth forecasts. Only 11 percent of economists surveyed by Bloomberg predict the central bank will add to stimulus at the meeting, out of a total of 72 percent that expect action by July. Eleven percent estimate there will be no further stimulus.

The yen has advanced 2.4 percent this year, the third-best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 0.8 percent and the euro weakened 0.1 percent.

The dollar gained initially as bookings for goods meant to last at least three years increased 2.6 percent, the biggest increase since November, after rising 2.1 percent in the prior month, a Commerce Department report showed today in Washington. The median forecast of economists surveyed by Bloomberg called for a 2 percent advance.

Jobless claims increased by 24,000 to 329,000 in the week ended April 19, the most in a month, a Labor Department report showed today in Washington. The median forecast of 44 economists surveyed by Bloomberg called for an increase to 315,000.

“The data for the most part is consistent with a recovering economy, and a broad range of economic metrics improving,” Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage, said in a telephone interview.

Draghi Comments

The euro erased an advance after Draghi said policy makers would need to increase the level of monetary stimulus if the medium-term outlook for inflation threatened to derail the region’s economic recovery.

“The objective here would not be to defend the current stance, but rather to increase meaningfully the degree of monetary accommodation,” Draghi said during a speech in Amsterdam.

JPMorgan Chase & Co.’s Group of Seven Volatility Index dropped 20 basis points, or 0.20 percentage point, to 6.27 percent, the lowest level since August 2007.

The gauge jumped to a record 26.55 percent in October 2008 shortly after the collapse of Lehman Brothers Holdings Inc.

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