Yen Climbs After China Data as Kuroda Touts Recovery

The yen strengthened versus most of its 16 major peers as a private report showing Chinese manufacturing contracted more than economists estimated last month spurred demand for safer assets.

Japan’s currency touched a two-week high against the dollar as violence in Ukraine spread and after Bank of Japan Governor Haruhiko Kuroda said in an interview with CNBC the economic recovery is on track, damping speculation the central bank will add to monetary stimulus. Brazil’s real fell the most among major dollar counterparts after the central bank reduced the volume of foreign-exchange swap contracts that it offered to roll over, signaling eased support for the currency. Sweden’s krona weakened after a report showed industrial production unexpectedly contracted in March.

There’s a “slightly risk-off tone in market as Japanese yen has moved some accordingly,” said Fabian Eliasson, foreign-exchange sales at Mizuho Financial Group Inc. in New York. The yen has gained amid “China purchasing managers’ index that was slightly disappointing as well as continued tension in Ukraine,” he said.

The yen gained 0.1 percent to 102.14 per dollar at 5 p.m. New York time, after touching 101.87, the strongest since April 17. Japan’s currency advanced 0.1 percent to 141.72 per euro. The shared currency was little changed at $1.3875.

Markets in Japan and the U.K. were shut today for national holidays.

Real Falls

The real dropped 1 percent to 2.2442 per U.S. dollar, the biggest decline among 16 major currencies tracked by Bloomberg.

The krona dropped as Statistics Sweden said industrial production fell 3.8 percent in March, after rising a revised 2 percent the previous month. The median estimate in a Bloomberg News survey of economists was for a 0.5 percent increase.

The currency declined 0.7 percent to 9.0934 per euro and slipped 0.7 percent to 6.5532 per dollar

The Turkish lira climbed against most of its 31 major currencies tracked by Bloomberg as the statistics agency in Ankara said consumer prices rose at an annual rate of 9.38 percent last month, the quickest since April 2012.

The lira appreciated 0.3 percent to 2.1002 per dollar. The currency rose for an eighth day, its longest winning streak since April 2010.

ECB Watch

The European Central Bank, which is considering taking unprecedented steps to avert the risk of deflation, including negative interest rates or implementing quantitative easing, may take action as early as this week when its Governing Council meets in Brussels. The European Commission predicted low inflation will remain a threat to euro-area expansion for at least the next two years as it trimmed its economic-growth forecast and warned of the impact of tensions with Russia.

The euro has rallied 1 percent against the greenback this year and gained 0.7 percent last month.

China’s yuan strengthened the most in almost a month after the central bank raised the currency’s reference rate. The People’s Bank of China boosted the yuan’s daily fixing by 0.03 percent to 6.1560 per dollar.

The currency rose 0.22 percent, the most since April 8, to 6.2455 per dollar in Shanghai, China Foreign Exchange Trading System prices show.

Factory Index

A purchasing managers’ index for China’s manufacturing was at 48.1 in April, HSBC Holdings Plc and Markit Economics said today. That compared with 48 the previous month and a 48.4 median estimate from analysts surveyed by Bloomberg News. Numbers below 50 indicate a contraction.

“There is slight risk aversion” that is supportive of the yen, said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “We had some soft data from China, which is negative for risk appetite.”

Ukraine continued military operations to dislodge rebels from its eastern industrial heartland as violence that’s spread to the Black Sea gateway of Odessa threatens to loosen Kiev’s control of the regions.

In an interview with CNBC dated yesterday, the BOJ’s Kuroda said private economists have been “consistently wrong” on Japan. Nominal wages are expected to rise, he said. Westpac Banking Corp. ended its recommendation to buy the dollar against the yen as Kuroda signaled no immediate expansion in monetary easing.

Japan Outlook

“Kuroda is currently ‘talking down’ the chances of further monetary policy developments in the near term,” Robert Rennie, the head of currency and commodity strategy at Westpac in Sydney, wrote in a research note today. “Arguments for being long USD/JPY right now are running very thin.” A long position is a bet an asset will appreciate.

The Bloomberg Dollar Spot Index was little changed after last week’s drop, before Federal Reserve Chair Janet Yellen testifies to lawmakers this week.

Yellen said on April 16 that wage increases remain at an historically slow pace with “few signs” of a broad-based acceleration. She is due to testify on May 7 to the Joint Economic Committee of the U.S. Congress. Futures traders see about a 7 percent chance the Federal Open Market Committee will raise benchmark borrowing costs in December.

The U.S. Labor Department said on May 2 that employment climbed 288,000 in April, the most since January 2012. Unemployment dropped to 6.3 percent, the lowest level since September 2008.

The Bloomberg Dollar Spot Index, which monitors the greenback against 10 major counterparts, fell 0.02 percent to 1,007.55. It declined 0.3 percent last week and 1.2 percent this year.

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