The yen weakened from an almost six-week high versus the dollar as Chinese data signaled optimism for economic growth and fueled demand for riskier assets.
The Japanese currency dropped against 14 of its 16 major peers as the Tankan report showed areas of weakness in the nation’s economy, fueling speculation the Bank of Japan will ease policy further. The pound touched the highest level in more than five years versus the dollar after U.K. manufacturing growth unexpectedly accelerated. Expectations for currency price swings slumped to a record low.
“It seems to be a little bit more risk-on,” Sireen Harajli, a strategist at Mizuho Bank Ltd. in New York, said by phone. “The dollar is getting a little bit of a push.”
The yen weakened 0.2 percent to 101.53 per dollar at 5 p.m. New York time, after reaching 101.24 yesterday, the strongest since May 21. It declined 0.1 percent to 138.88 per euro. The greenback gained 0.1 percent to $1.3679 per euro after touching $1.3700, the weakest since May 21.
New Zealand’s dollar rallied 3.1 percent last month, the most of the greenback’s 16 major peers. Sterling climbed 2.1 percent, while the Norwegian krone dropped 2.6 percent and the Mexican peso declined 0.9 percent.
Last quarter, South Korea’s won rose 5.2 percent and Canada’s dollar added 3.6 percent. The Swedish krona depreciated 3.2 percent.
The pound strengthened as much as 0.4 percent to $1.7166 today, the highest since October 2008, before trading at $1.7150, up 0.3 percent. A Markit Economics index showed U.K. manufacturing growth quickened to the fastest pace in seven months last month.
Russia’s ruble weakened on growing concern tougher sanctions will follow the ending of a cease-fire in Ukraine without a peace deal. The ruble dropped 0.9 percent versus the central bank’s target currency basket.
The yuan climbed for a fourth day in the longest run of gains since January as reports showed factory output picked up in June. The Chinese currency rose 0.1 percent to 6.2016 per dollar.
China’s official Purchasing Managers’ Index of manufacturing advanced to 51 in June, the highest level this year. A similar index from HSBC Holdings Plc and Markit Economics rose to 50.7 from the previous month’s 49.4. Readings above 50 signal expansion in the world’s largest consumer of commodities.
Australia’s dollar rose to the highest in almost eight months as the nation’s central bank kept interest rates at record lows. Reserve Bank of Australia Governor Glenn Stevens said “the most prudent course is likely to be a period of stability in interest rates,” in a statement after today’s policy decision. The currency was supported by manufacturing data from China, Australia’s biggest trading partner.
The Aussie rose 0.7 percent to 94.97 U.S. cents and touched 95.05 cents, the most since Nov. 7.
“The improvement in both the Aussie and the weakening of the yen would be consistent with more constructive environment for risk and carry,” Robert Sinche, global strategist at Stamford, Connecticut-based brokerage Pierpont Securities LLC, said in a phone interview. “Probably the driver is the improvement in the Chinese PMI. While it’s still pretty tepid at 51, it’s was the best reading of the year.” Carry trades exploit differences in global interest rates.
The yen weakened as a gauge of sentiment among large Japanese manufacturers fell to 12 this fiscal year through March from 17 versus three months earlier, the Tankan report showed today.
The Bloomberg Dollar Spot Index was little changed at 1002.67, after touching 1,002.25, the lowest level since May 8.
Employers added 215,000 jobs in June, a fifth straight monthly increase of more than 200,000, a report on nonfarm payrolls is forecast to show July 3.
“Investors are just waiting for the NFP,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. “If the data’s pretty decent, will people start going into dollar long? That’s the real question for me.” A long position is a bet that an asset will increase in value.
JPMorgan Chase & Co.’s global currency volatility index fell to 5.38 percent, the lowest in figures dating back to 1992, as major central banks flood markets with cash.
The European Central Bank will keep policy unchanged at a meeting this week, after cutting its deposit facility rate to negative last month, according to every economist in a Bloomberg survey. Federal Reserve Bank of San Francisco President John C. Williams said yesterday that recent U.S. economic data were consistent with a rise in interest rates from record lows in the second half of next year.
“I can’t see volatility getting any lower,” said Thomas Averill, a managing director in Sydney at Rochford Capital, a currency and rates risk-management company. “The market is pricing in very, very easy monetary policy forever in the U.S.”