Yen Weakens to One-Month Low on Global Growth Signs

The yen dropped to a one-month low versus the dollar as signs of economic improvement around the globe damped demand for refuge assets while data from the Bank of Japan signaled progress in the central bank’s easing efforts.

Japan’s currency slid versus 14 of its 16 major peers after data showed the nation’s monetary base expanded by the most in 40 years. The dollar touched a six-week high against the euro before U.S. data that economists said will show factory output increased for a third month in August, boosting speculation the Federal Reserve will start to taper its quantitative-easing program. The Australian dollar advanced and Indonesia’s rupiah fell to a four-year low.

“Our long-term view is that there will be yen weakness,” said Derek Mumford, a director at Rochford Capital, a foreign-exchange risk-management company in Sydney. The currency will “inevitably weaken, particularly against the dollar with the prospect of winding back of QE in the very near future by the Fed and the very fact that the BOJ will keep printing money.”

The yen depreciated 0.3 percent to 99.67 per dollar as of 8:36 a.m. London time, after touching 99.70, the weakest since Aug. 2. It slid 0.1 percent to 131.20 per euro after dropping 1 percent yesterday. The dollar advanced 0.2 percent to $1.3162 per euro after reaching $1.3161, the strongest since July 22.

The Bloomberg U.S. Dollar Index, which tracks the greenback’s performance against a basket of 10 major currencies, gained 0.2 percent to 1,037.28, the highest since July 16.

Manufacturing Rebound

The Institute for Supply Management’s U.S. factory index was 54 in August, a third month of expansion, and compared with a two-year high of 55.4 in July, economists forecast before the release of the data today. The Fed, which purchases $85 billion a month in Treasury and mortgage debt, will reduce the amount at its next meeting on Sept. 17-18, according to 65 percent of economists in an Aug. 9-13 Bloomberg survey.

The European Union’s statistics office will confirm tomorrow that gross domestic product in the 17-nation currency bloc expanded 0.3 percent in the April-June period, ending the longest recession on record, according to the median estimate of economists surveyed by Bloomberg News.

China’s non-manufacturing Purchasing Managers’ Index fell to 53.9 last month from 54.1 in July, data showed today. A reading above 50 indicates expansion.

Emerging Markets

Emerging-market currencies have slumped amid concern higher yields in the U.S. will accelerate capital outflows.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks Asia’s major currencies except the yen, touched 113.58 on Aug. 23, the lowest since September 2010. It dropped 0.3 percent to 114.29 today. It had risen 4.7 percent from a June 2012 low to its 2013 high of 119 in May.

“Most of the Asian currencies appreciated quite a bit against the U.S. dollar,” Kumar Palghat, a Sydney-based money manager and founder of Kapstream Capital, which oversees about $5.2 billion, said in an interview with Bloomberg Television. “Now it’s just their turn to go down and the dollar’s going up because the U.S. economy looks a lot better.”

The rupiah slid 0.8 percent to 11,065 per dollar, the weakest level since April 2009, prices from local banks compiled by Bloomberg show.

The BOJ said today Japan’s monetary base expanded 42 percent in August from a year earlier, the biggest gain since November 1973, to 177 trillion yen. The central bank buys more than 7 trillion yen of Japanese government bonds every month to increase the gauge of the supply of money to 270 trillion yen by the end of 2014 and stoke 2 percent inflation. BOJ policy makers are meeting this week.

Australia’s dollar rose after the nation’s Reserve Bank held its benchmark rate unchanged at 2.5 percent and refrained from signaling further monetary easing. The decision was in line with estimates of all 32 economists in a Bloomberg survey.

The Aussie gained 0.6 percent to 90.31 U.S. cents.

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