Yen Climbs as Ukraine Tension Boosts Safety Bid; Ruble DeclinesAndrea Wong
The yen climbed the most in three weeks against the dollar as reports that Russian President Vladimir Putin put fighter jets on combat alert amid rising tensions in Ukraine boosted demand for less-risky assets.
The Swiss franc, another traditional haven, rose to the strongest level since April versus the euro. The 18-nation shared currency erased losses against the dollar before data on euro-area core consumer prices releases tomorrow. Russia’s ruble declined to a record, and Ukraine’s hryvnia weakened through 11 per dollar for the first time amid deepening tension in the region. Federal Reserve Chair Janet Yellen said the central bank has been successful in lowering long-term rates.
“Putin is conducting military exercises and putting Russian forces on high alert,” said Richard Franulovich, the chief currency strategist for the northern hemisphere at Westpac Banking Corp. “That’s risk-negative.”
The yen strengthened 0.3 percent to 102.13 per dollar at 3:27 p.m. New York time after adding 0.6 percent, the most on a closing basis since Feb. 3. The Japanese currency climbed 0.1 percent to 140.01 per euro, having rallied as much as 0.9 percent earlier. The euro climbed 0.2 percent to $1.3710, after falling as much as 0.3 percent.
The Swiss franc appreciated as much as 0.3 percent to 1.21572 per euro, touching the strongest level since April 18.
The euro has lost 0.1 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The yen led gains with a 3.6 percent advance, while the dollar climbed 0.1 percent.
Of the 16 major currencies, the Brazilian real’s and Norwegian Krone’s 4 percent rally versus the dollar were the best performance this month, followed by a 3.8 percent rise for South Africa’s rand. The yen slipped 0.1 percent.
The Russian currency depreciated 0.2 percent to 42.0712 against Bank Rossii’s target basket of dollars and euros, and exceeded the upper boundary of the central bank’s corridor of 42.15 earlier. The hryvnia, which is managed by the central bank, weakened 5.4 percent to 10.70 per dollar, extending its drop this year to 23 percent. It reached as weak as 11.3075.
Russia began a series of military exercises in its western central regions yesterday, saying they were not related to events in Ukraine. A fighter-jet mission today is part of those drills, Interfax reported, citing Russia’s Defense Ministry. Tensions flared in the southern Ukrainian region of Crimea as an armed group occupied parliament and government buildings in the capital of the region, replacing the Ukrainian flag with Russia’s tricolor.
“The market is really afraid because it doesn’t understand what’s going on,” Vadim Bit-Avragim, who helps oversee about $4.2 billion at Kapital Asset Management in Moscow, said by phone today. “All investors are pricing in the possibility of Russia’s military intervention in Ukraine.”
Brazil’s real led gains in major currencies after official data showed fourth quarter growth exceeded all analyst forecasts. Gross domestic product rose 0.7 percent from the previous quarter, and the central bank said growth will improve this year and in 2015.
The real rallied 1.3 percent to 2.3192 per dollar, touching the strongest level since Dec. 18.
The euro rose as investors weigh whether European Central Bank policy makers will consider additional stimulus to boost inflation when they meet on March 6.
Annualized inflation in the German region of Saxony slowed to 1.2 percent this month from 1.4 percent in January, a report showed today. Consumer prices also rose at a slower pace in the regions of Hesse, Bavaria, Baden Wuerttemberg, North Rhine Westphalia and Brandenburg.
A euro-area report due tomorrow is forecast to show inflation this month was below 1 percent for a fifth month in February.
“The data will begin to shape expectations for the ECB next week,” Greg Gibbs, a currency strategist in Singapore at Royal Bank of Scotland Group Plc, wrote in a research note today. “RBS expects the ECB to incrementally ease policy by lowering the policy rate from 0.25 percent to 0.10 percent.”
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, has dropped 1.1 percent in February, poised for the biggest monthly slide since September. It fell 0.2 percent today at 1,020.22, having gained 0.1 percent in 2014.
Yellen appeared before the Senate Banking Committee after the previously scheduled hearing was postponed on Feb. 13 owing to a snowstorm. She said the Fed “will likely reduce the pace of asset purchases in further measured steps at future meetings,” and a “significant” change in the economic outlook might prompt the central bank to consider altering the tapering path.
The central bank cited economic improvement for cutting its monthly bond-buying program by $10 billion a month in January and in February to $65 billion.