Yen Rises Most in 2 Weeks as Oil Spurs Haven Bid; Real Rallies

Updated on

The yen strengthened the most in two weeks against the dollar as oil prices slumped to a five-year low, feeding demand for haven assets.

Japan’s currency gained versus all but three of its 31 major peers as the Bank of Japan said it will increase the length of maturity of government bonds it buys. The euro touched a two-year low versus the greenback as Greece heads for elections. Australia’s dollar fell to the weakest level against New Zealand’s currency since the Aussie was freely floated in 1983. Russia’s ruble, the year’s worst performer, rallied with the Brazilian real.

“You’re seeing year-end profit-taking in dollar-yen,” Kathy Lien, managing director at BK Asset Management in New York, said by phone. “The euro is just extending its existing trend. The market is continuing to discount quantitative easing next year by the European Central Bank.”

The yen appreciated 1 percent to 119.48 per dollar as of 5 p.m. New York time after adding as much as 1.5 percent, the biggest gain since Dec. 16. It advanced 1 percent to 145.25 versus the euro. The 18-nation common currency traded at $1.2156 after falling to $1.2124, the weakest since July 2012. The Aussie slid as much as 0.2 percent to NZ$1.0422.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 trading partners, dropped 0.4 percent to 1,128.69. It closed at 1,133.13 on Dec. 23, the highest since March 2009, and is up 11 percent this year.

West Texas Intermediate crude for February delivery slid as much as 91 cents to $52.70 a barrel in New York, the lowest since May 2009, before trading at $53.89.

Mighty Dollar

The dollar is set to appreciate against all of its 31 major peers in 2014 for the first time in data going back to 1989 as quickening growth gives the Federal Reserve reason to start raising interest rates next year.

The yen has dropped 12 percent this year, a third annual decline, and the euro fell 12 percent for its first drop in three years.

Russia’s ruble headed for its largest annual slide versus the dollar since 1998 as slumping oil, sanctions over the Ukraine conflict and the threat of credit-rating downgrades weighed on the economy.

The ruble strengthened 4 percent to 56 per dollar today to trim its loss to 42 percent this year.

Brazil’s real is poised for a 11 percent loss against the U.S. currency, sliding for a fourth year. The currency pared the decline today, adding 1.8 percent to 2.6576 per dollar, as a plan to reduce some pension and unemployment benefits eased concern that the nation faces a reduced credit rating.

Euro Outlook

The euro headed for its biggest annual drop since 2005 against the greenback as Greek Prime Minister Antonis Samaras yesterday failed to persuade parliament to support his presidential candidate. Samaras is due to request early elections on Jan. 25.

“The euro is going to break $1.20 against the dollar in the first quarter,” said Kazuo Shirai, a trader at MUFG Union Bank NA in Los Angeles. “More than continued improvement in the U.S., it’s a case of Europe and other regions stumbling.”

The yen gained after the BOJ said in a statement it will buy at least 1.25 trillion yen of debt due in more than 10 years per month, up from a minimum target of 650 billion yen. The central bank will continue to purchase between 8 trillion yen to 12 trillion yen of government securities in total each month, it said.

Something Crazy

JPMorgan Chase & Co.’s Group of Seven Volatility Index declined from the most in more than a year today. The gauge fell eight basis points, or 0.8 percentage point, to 9.73 percent after climbing to 9.84 percent yesterday, the highest since September 2013.

“There is a little bit of risk aversion,” said Fabian Eliasson, who works in foreign-exchange sales at Mizuho Financial Group Inc. in New York. “It’s a combination of fairly light markets, a little bit of fear into the market” on Greece, “and oil has something to do with it as well.”

The yen’s three-year slide is expected to continue into 2015, with a drop to 125 per dollar by year-end, according to the median estimate of more than 50 analysts surveyed by Bloomberg News. The euro is forecast fall to $1.18.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE