Yen Rises From 6-Month Low Versus Dollar; Euro Gains Before ECB

The yen rose from a six-month low against the dollar as investors awaited U.S. job data this week that may provide further evidence as to when the Federal Reserve will reduce stimulus that has weakened America’s currency.

Japan’s currency rallied versus the euro after weakening through 140 for the first time since October 2008 as a decline in European stocks spurred demand for safer assets. The 17-nation currency gained to almost a one-month high versus the dollar before the European Central Bank announces its next policy decision on Dec. 5. A measure of volatility among major currencies climbed to the highest level in seven weeks.

“The yen is taking a little bit of a break,” Sireen Harajli, a strategist at Mizuho Bank in New York, said in a phone interview. “I see it as a definitely a consolidation because you have some big numbers, some big events coming up -- you have the ECB on Thursday and also payrolls on Friday.”

The yen advanced 0.4 percent to 102.51 per dollar at 5 p.m. in New York after sliding to 103.38, the weakest level since May 23. Japan’s currency gained 0.1 percent to 139.30 per euro after depreciating to 140.03, the least since Oct. 14, 2008. The euro gained 0.3 percent to $1.3588, almost the highest level since Oct. 31.

Price Swings

JPMorgan Chase & Co.’s Group of Seven Volatility Index reached 8.39 percent, the highest level since Oct. 11. The gauge has increased from this year’s low of 7.48 on Oct. 28.

Sweden’s krona rose after two Riksbank deputy governors signaled they weren’t prepared to cut interest rates as they focus on containing debt growth in Scandinavia’s biggest economy. The currency gained 0.8 percent to 6.5151 per dollar.

The loonie, as the Canadian dollar is known for the image of the waterfowl on the C$1 coin, fell 0.1 percent to C$1.0649 per U.S. dollar and touched the weakest since August 2010. Stephen Poloz has stepped up the Bank of Canada’s focus on inflation, leading economists to say the chances of a cut in the central bank’s benchmark lending rate are rising.

South Africa’s current-account deficit widened to 6.8 percent of gross domestic product in the third quarter, the biggest gap in more than five years, as a weak rand boosted import costs while strikes and subdued global demand hurt exports. The rand fell 0.6 percent to 10.3310 per dollar.

Australia Rate

Australia’s dollar gained 0.3 percent versus the greenback, while New Zealand’s currency rallied 0.7 percent.

Australia’s central bank left its benchmark interest rate unchanged at a record low and said the currency is “still uncomfortably high,” even after a 4.6 percent decline since its previous meeting.

Producer prices in Europe’s common-currency zone fell 1.4 percent in October from a year earlier, which compares with a forecast 1 percent decline and a 0.9 percent fall in September.

The ECB cut its benchmark interest rate by a quarter point to 0.25 percent on Nov. 7. Governing Council member Ardo Hansson said Nov. 25 the bank stands ready to reduce borrowing costs further and is technically prepared to make its deposit rate negative.

“The current strength of the euro is dangerously underpricing the risk of more ECB action going into Thursday’s meeting,” said Eimear Daly, a currency-market analyst at Monex Europe Ltd. in London. “We saw a strong push-back into the dollar yesterday. Today’s trade has been driven by traders consolidating those gains before a plethora of key U.S. data released later in the week.”

Jobs Watch

U.S. employers hired 181,000 workers in November after adding 204,000 in the previous month, according to a Bloomberg News survey before the Labor Department report Dec.6. Fed officials have said they may reduce the central bank’s $85 billion in monthly bond purchases “in coming months” as the economy improves, according to minutes of their October meeting released last month. The Fed next meets Dec. 17-18.

The yen has tumbled 14 percent this year, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 7.1 percent and the dollar climbed 3.7 percent.

“In terms of the yen, we’ve had basically a straight shot from the beginning of November over the last month,” Robert Sinche, global strategist at Pierpont Securities Holdings LLC in Stamford, Connecticut, said in a phone interview. “This is a bit of a breather. We’re getting a little bit of profit taking in equities, not surprising we’re getting a little profit taking in dollar-yen here.”

The Stoxx Europe 600 Index of shares slid 1.5 percent and the Standard & Poor’s 500 Index declined 0.3 percent.

China’s yuan overtook the euro to become the second-most used currency in global trade finance in 2013, according to the Society for Worldwide Interbank Financial Telecommunication. The onshore yuan closed at 6.0924 per dollar in Shanghai, little changed from yesterday’s 6.0929, China Foreign Exchange Trade System prices show.

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