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Yen Rises to 5-Month High Versus Euro on Haven Bid

The yen strengthened to a five-month high against the euro after reports a Malaysian jet carrying 295 people was shot down over eastern Ukraine near its border with Russia, boosting haven assets.

Israel’s shekel slid after its army launched a ground operation in Gaza. Japan’s currency gained versus all of its 31 major peers as U.S. stocks plunged and Treasuries rose. The ruble weakened the most in four months against the dollar as the U.S. and European Union imposed extra sanctions on Russia yesterday over the Ukraine conflict.

“We were going to have a little bit of a pullback, a little bit of a paring of risk, and it seems that has continued,” said Fabian Eliasson in foreign-exchange sales at Mizuho Financial Group Inc. in New York. “There’s been a little bit of yen buying and I would attribute that to a certain degree to a risk-off type of trade.”

The yen gained 0.5 percent to 136.85 per euro at 5 p.m. in New York after reaching 136.82, the strongest level since Feb. 6. Japan’s currency strengthened 0.5 percent to 101.18 per dollar. The dollar was little changed at $1.3526 per euro.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, was little changed at 1,010.31 after climbing to 1,010.67 yesterday, the highest since June 20.

Gaza, Ukraine

The shekel tumbled as heavy artillery fire and explosions were heard in Gaza as Israeli Prime Minister Benjamin Netanyahu said the country’s forces had started a ground operation, according to a text message from his office. The army aims to strike “terrorist infrastructure” in several areas, including tunnels and rocket launchers, military spokesman Lieutenant-Colonel Peter Lerner said in a phone briefing.

Israel’s currency fell as much as 0.6 percent, the most in more than a month, to 3.4355.

Russia’s ruble weakened after a Boeing 777 flight between Amsterdam and Kuala Lumpur was hit by a missile and went down near the eastern Ukraine town of Torez, Ukrainian Interior Minister adviser Anton Gerashchenko said on his Facebook page. Ukraine blamed pro-Russian rebels for downing the plane; the separatists denied the accusation.

“The political consequences between euro zone and Russia are not yet known,” said Sebastien Galy, a senior-currency strategist at Societe Generale SA in New York. “We’re seeing the dollar bid across the board. It seems to be trading risk aversion and fears that things are not going in the right direction.”

Russia Sanctions

Russia’s currency fell earlier after U.S. and Europe Union imposed the most aggressive sanctions to date on Russian business and said more may follow, acting after weeks of threats over the confrontation in Ukraine.

The ruble sank 2.3 percent to 35.1820 per dollar after declining 2.4 percent, the biggest drop since March 3.

Brazil’s real was the biggest loser of the dollar’s 16 major peers, sliding 1.5 percent after the nation’s central bank left rates unchanged as it weighs weaker economic growth against above-target inflation. The currency touched 2.2610 per dollar, its lowest level since June 18.

The South Korean won was the top gainer after the yen, rising the most since June 27 after two days of declines. The currency advanced 0.3 percent to 1,029.32.

Standard & Poor’s 500 Index fell 1.2 percent after sinking 1.3 percent, the most since May 15, after the Stoxx Europe 600 index declined 0.9 percent and the Shanghai Composite Index of Chinese stocks tumbled 0.6 percent.

Benchmark 10-year Treasury note yields declined eight basis points, or 0.08 percentage point, to 2.45 percent, the lowest level since May 29.

U.S. Data

The Bloomberg Dollar Spot Index slipped as U.S. housing starts declined 9.3 percent to a 893,000 annual pace in June from 1.02 million in the previous month, according to today’s Commerce Department report.

Jobless claims declined by 3,000 to 302,000 in the week ended July 12, a Labor Department report showed today in Washington. The median forecast of 51 economists surveyed by Bloomberg projected 310,000.

The Philadelphia Federal Reserve’s business outlook index rose more than forecast to the highest since March 2011 this month, a report showed today.

Futures prices show a 72 percent chance the Fed will raise its benchmark rate by September 2015, up from a 69 percent probability at the start of this month. The central bank has kept the federal funds rate in a range of zero to 0.25 percent since December 2008.

The yen has gained 4.3 percent this year, the third-best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes after the dollars of New Zealand and Australia. The greenback dropped 0.2 percent and the euro weakened 2 percent.

(An earlier version of this story was corrected because it said the yen weakened against the euro.)

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