Yen Climbs to 5-Week High Versus Dollar on Shutdown; Euro Rises

The yen strengthened to a five-week high against the dollar as the partial shutdown of the U.S. government showed no signs of ending, fueling speculation there will be another standoff over raising the debt ceiling.

Japan’s currency rose at least 0.4 percent versus all 16 of its major peers as an industry report showed U.S. companies added fewer workers than economists forecast, boosting demand for safer assets. Prime Minister Shinzo Abe unveiled a stimulus package yesterday to offer a cushion for a sales-tax increase. The euro strengthened against the dollar as European Central Bank President Mario Draghi said there were signs the economy was improving. Australia’s dollar declined.

“It’s really the U.S. story,” said Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Up until Abe’s speech yesterday, the markets were a bit cautious of selling the dollar ahead of that event. The Congress was a dollar-sell story but the event risk in terms of the Abe speech made the markets a little bit cautious and we’ve now had that removed.”

The yen rose 0.7 percent to 97.36 per dollar at 1:53 p.m. London time after appreciating to 97.23, the strongest level since Aug. 28. Japan’s currency gained 0.4 percent to 132.09 per euro. The common currency rose 0.3 percent to $1.3568.

Extraordinary Measures

The U.S. shutdown commenced yesterday after lawmakers failed to agree on a spending plan for the new fiscal year. Treasury Secretary Jacob J. Lew said the U.S. has begun using the final extraordinary measures to avoid breaching the debt limit, and repeated that they will be exhausted no later than Oct. 17.

U.S. companies hired 166,000 workers last month following a revised 159,000 increase in August that was smaller than initially estimated, according to the ADP Research Institute in Roseland, New Jersey. The median forecast of 40 economists surveyed by Bloomberg called for an advance of 180,000.

The yen was also boosted after Abe yesterday introduced tax breaks for companies together with a 5-trillion-yen program to promote investment and growth.

The yen has still weakened 10 percent this year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro appreciated 5.7 percent and the dollar gained 2.4 percent.

Japan’s currency will weaken to 103 per dollar by year-end, Bank of Tokyo’s Halpenny said. The yen will trade at 102 by Dec. 31 and 105 by the middle of 2014, according to the median estimate of forecasts compiled by Bloomberg.

Italian Vote

The euro reversed an earlier decline against the dollar after Draghi said the central bank was ready to use all available instruments to help the region recover.

The ECB, meeting in Paris, kept its benchmark refinancing rate at 0.5 percent as predicted by all 52 economists in a Bloomberg News survey.

The euro was also boosted after Italian Prime Minister Enrico Letta won a confidence vote in parliament today, avoiding the need for another election.

The government had teetered on the verge of collapse after the former premier’s decision last week to withdraw support for the coalition, prompting Letta to call the ballot.

Australia’s currency fell versus all its 16 major peers after reports showed the nation had a trade deficit in August and building approvals climbed less than economists forecast.

The Aussie advanced yesterday after the Reserve Bank of Australia kept borrowing costs unchanged.

“The economy is still going to need to do more work and that’s where the RBA has to come into the equation with additional interest-rate cuts,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “That’s got to probably weigh on Aussie-dollar sentiment.”

The Australian dollar declined 0.6 percent to 93.40 U.S. cents after climbing to 94.35 yesterday, the strongest level since Sept. 23.

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