Yen Weakens From 3-Week High on Reduced Haven Demand

The yen dropped from a almost three-week high versus the dollar as tensions eased in Ukraine and the U.S. showed signs of pushing back militants in Iraq, reducing haven demand.

The euro fell toward the lowest since November as data showed investors were the most bearish on the currency in two years. Indonesia’s rupiah led emerging-market currencies higher on bets judges will dismiss an election challenge. Canada’s dollar gained for the first time in three days as housing starts topped forecasts for a fourth month. The pound rose versus the euro. Stocks climbed globally.

“We are still in the relief rally,” said Sebastien Galy, a senior currency strategist at Societe Generale SA in New York. “The relief can be seen very mildly in the outperformance of the pound versus euro and Canadian dollar versus dollar.”

The yen weakened 0.2 percent to 102.19 per dollar as of 5 p.m. New York time, after reaching 101.51 on Aug. 8, the strongest since July 24. The euro depreciated 0.2 percent to $1.3385 after reaching $1.3333 on Aug. 6, its weakest level since Nov. 8. Japan’s currency was little changed at 136.78 versus the euro.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 developed-market peers, was little changed at 1,021.22, after four straight weeks of gains.

A Bloomberg gauge with equal weightings of the dollar’s 20 major emerging-market peers climbed 0.2 percent to 91.3261, a second day of gains.

Loonie, Pound

The Canadian dollar rose as the pace of work on new homes rose 0.7 percent to a seasonally adjusted annual pace of 200,098 units, the fastest since October, from a revised 198,665 in June, Ottawa-based Canada Mortgage & Housing Corp. reported today. Economists forecast a decline to 193,000, according to a Bloomberg survey.

The currency, know as the loonie for the image of the waterfowl on the C$1 coin, gained 0.5 percent to C$1.0921.

The pound strengthened against the euro as investors prepared for clues from projections due in the Bank of England’s Inflation Report, due Aug. 13, as to when it will begin raising interest rates. Sterling climbed 0.3 percent to 79.74 pence per euro.

Indonesia’s currency rose after a court last week questioned evidence provided by losing presidential candidate Prabowo Subianto, who says Joko Widodo’s victory is invalid because it was obtained “unlawfully” or through “abuse of authority” by the election commission.

The rupiah advanced 0.8 percent to 11,685 per dollar.

Net Shorts

Norway’s krone strengthened all of its 31 major peers except the rupiah as a report showed consumer prices increased in the 12 months through July more than economists forecast. The krone gained for a fourth day versus the U.S. currency, appreciating 0.9 percent to 6.1828 per dollar, in the longest rally since five days of gains ended April 10.

Futures traders’ bets that the euro will decline against the dollar rose to the most since August 2012, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on depreciation in the euro compared with those on a rise -- net shorts -- was 128,747 in the week through Aug. 5, compared with 108,075 a week earlier.

Ukraine, Iraq

Interfax reported that Russia’s Defense Ministry said last week that warplanes ended drills in the region near Ukraine. RIA Novosti said Russia is ready to mediate between Ukraine and the rebels, citing Russian Security Council head Nikolai Patrushev.

The conflict continued today, with Ukraine telling residents of separatist strongholds in its easternmost regions to flee as government troops close in after dismissing a cease-fire offered by the militants.

In Iraq, U.S. strikes have slowed Islamic State advances in the north, though the group still holds vast swaths of territory in Syria and Iraq as political haggling is hurting government attempts to offer a coordinated response.

In dollar-yen, there’s “some relief rally after the U.S. airstrike-news selloff,” said Masafumi Takada, a New York-based director at BNP Paribas SA. “Still nervous on geopolitical risk but holding well as long as the stock market is stabilizing.”

The yen declined as Japanese stocks rose after the nation’s Health Ministry said the 126.6 trillion-yen Government Pension Investment Fund has flexibility with deviation limits on assets.

Stocks Rise

The Topix index of Japanese shares jumped 2 percent, its biggest advance since April 16. The measure fell 2.4 percent on Aug. 8, its largest drop since May 7.

The Standard & Poor’s 500 Index rose 0.3 percent. The MSCI Asia Pacific Index added 1.3 percent and the Stoxx Europe 600 Index gained 1.4 percent.

Futures traders increased their bets that the yen will decline against the U.S. dollar to the most in almost five months, figures from the CFTC show. Net shorts were 95,399 in the week ended Aug. 5, the most bearish since March 14.

The Bloomberg Dollar Spot Index gained 0.7 percent last week before an Aug. 13 report forecast to show U.S. retail sales increased 0.2 percent in July after a 0.2 percent advance the prior month, according to the median estimate in a Bloomberg survey.

The Federal Reserve cut monthly bond purchases by $10 billion for a sixth consecutive meeting last month to $25 billion. The next policy decision is due on Sept. 17. Futures traders are pricing in a 70 percent chance of an increase in the Fed’s benchmark rate to at least 0.5 percent by September 2015.

Aggregate net futures positions wagering on gains in the U.S. currency against major peers -- the yen, euro, pound, Swiss franc, Mexican peso and the dollars of Australia, Canada and New Zealand -- rose 115,893 to 129,190 in the week ended Aug. 5, the biggest increase in bullish bets since February 2013.

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