Yen Rises as Turkey's Downing of Russian Jet Sparks Haven Appeal

  • Turkey says it shot down warplane near its border with Syria
  • Dollar falls from 8-month high even as GDP growth revised up

The yen rose after reports that Turkey shot down a Russian warplane near the Syrian border boosted demand for the safest assets.

Japan’s currency climbed against most of its major peers following the reports from Turkey’s military, while that nation’s lira posted the biggest loss in the group. The reaction in currency markets was muted compared with the rally in the safest government bonds, though, with the euro briefly reaching a one-week high versus the dollar before paring gains as investors awaited further details about the incident.

"Very harsh words are being exchanged already -- there are conflicting stories from both sides," said Fabian Eliasson, head of U.S. corporate foreign-exchange sales in New York at Mizuho Financial Group Inc. "The yen has rallied a little bit since European hours."

U.S. GDP

Japan’s currency appreciated 0.3 percent to 122.43 per dollar as of 12:28 p.m. New York time, after touching 122.36, its strongest level since Nov. 16. Europe’s shared currency climbed 0.2 percent to $1.0655.

Turkey’s lira sank as much as 1.2 percent against the greenback as the downing of the Russian plane threatened to escalate tension between the two nations.

“One of the things that could very well come out of this is more risk-off in things like foreign exchange, particularly in emerging-market countries,” Ira Jersey, a senior client portfolio manager at OppenheimerFunds Inc. in New York, said on Bloomberg Television’s “Surveillance” with Tom Keene and Francine Lacqua. “An issue could even be with the euro because this is a NATO member state.”

A gauge of the dollar versus its major peers retreated from an eight-month high amid speculation that the Fed will only raise rates gradually next year after a December liftoff. The dollar remained weaker after official data showed the U.S. economy grew at a 2.1 percent annualized rate last quarter, up from an initial estimate of 1.5 percent, Commerce Department figures showed.

Futures indicated a 74 percent chance of the U.S. central bank raising its benchmark rate at its next meeting, data compiled by Bloomberg show. That’s up from 50 percent odds at the end of October. The calculation assumes the effective fed funds rate averages 0.375 percent after the first increase, compared with the current zero to 0.25 percent target range.

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