Yen Weakens Versus Major Peers on Reduced Haven Demand

The yen weakened versus all but two of its 31 major peers amid speculation the crises in Ukraine and the Middle East have waned, diminishing demand for haven assets.

A gauge of the dollar remained lower after applications for unemployment benefits in the U.S. rose more than forecast last week. The euro traded at almost this year’s low versus the dollar after Germany’s economy contracted last quarter and France’s stagnated, boosting speculation the European Central Bank will add stimulus. The pound fell to a four-month low, while the Ukrainian hryvnia rose as President Vladimir Putin said Russia will do all it can to end the regional conflict.

“For any geopolitical situation, when it first emerges it has a big market impact, and even if the situation doesn’t improve, we go along through time and the market becomes comfortable with it,” Greg Anderson, head of global foreign-exchange strategy at Bank of Montreal, said in a phone interview. “We’re starting to get the building-in, in early stages, positioning for a new round of quantitative-easing by the Bank of Japan.”

The yen dropped as much as 0.3 percent before trading at 136.92 per euro at 5 p.m. in New York. Japan’s currency fell less than 0.1 percent to 102.45 per dollar after earlier touching 102.66, the weakest level since Aug. 5. The euro was little changed at $1.3365 after falling to $1.3333 on Aug. 6, the least since Nov. 8.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 developed-market peers, fell 0.1 percent to 1,020.96. The gauge touched 1,024.67 on Aug. 6, matching the highest since Feb. 11.

Ukraine, Russia

The hryvnia led eastern European currencies higher after Putin’s speech in Crimea and as Ukraine opened the door to a compromise over humanitarian aid arriving on hundreds of trucks from Russia, saying it could accept the supplies if the Red Cross distributed them in the nation’s war-torn eastern regions.

Ukraine’s currency gained 1.5 percent to 12.9500 per dollar, trimming its decline this year to 36 percent, the most after Ghana’s cedi among more than 150 currencies tracked by Bloomberg.

Hungary’s forint rose 0.4 percent and the Polish zloty gained 0.3 percent. Russia’s ruble added 0.2 percent.

South Korea’s won rose the most since April 9 after the central bank lowered benchmark borrowing costs for the first time since May 2013 to revive economic growth. The won jumped 0.8 percent to 1,020.93 per dollar.

Iraq, Gaza

The yen weakened as Iraqi Prime Minister Nouri al-Maliki said he has agreed to leave office and clear the way for his designated successor, and as Kurdish forces bolstered by U.S. airstrikes fought to retake positions overrun last week by Islamic State fighters in northern Iraq. Israel and Gaza Strip militants agreed to stop hostilities for five more days.

“It feels like it has subsided a little bit,” Fabian Eliasson, who works in foreign-exchange sales at Mizuho Financial Group Inc. in New York, said in a phone interview of geopolitical turmoil. “There was a little focus on Europe overnight and the very low growth. Germany obviously is a little bit of a concern, and the very low inflation.”

The euro declined against most major peers after gross domestic product in Germany, Europe’s largest economy, contracted 0.2 percent in the second quarter, compared with a 0.1 percent decline projected by economists in a Bloomberg News survey. Data earlier showed the French economy, the region’s second-largest, posted zero growth in the same period, compared with a median estimate for a 0.1 percent gain.

‘Weak Outlook’

The European Union’s statistics office said today that growth in the euro-area economy stalled in the second quarter from the previous three months, when it grew 0.2 percent. The median forecast in a Bloomberg survey of analysts was for growth of 0.1 percent. In a separate report, the agency confirmed the annual inflation rate was 0.4 percent in July.

The ECB cut the deposit rate to minus 0.1 percent and lowered the main refinancing rate to a record 0.15 percent in June. Policy makers next meet on Sept. 4.

“While the euro didn’t fall off the cliff, as some bad news is already in the price, the weak outlook will weigh on the currency longer-term,” said Kathleen Brooks, European research director at Forex.com in London.

Sterling depreciated against most of its 16 major peers as Monetary Policy Committee member David Miles said the bank could keep interest rates at record-low levels for “a bit longer.”

The pound was little changed at $1.6686 after falling to $1.6658, the lowest since April 8.

The Bloomberg Dollar Spot Index dropped as jobless claims climbed by 21,000 to 311,000 in the period ended Aug. 9, the highest in six weeks, a Labor Department report showed today in Washington. The median forecast of 48 economists surveyed by Bloomberg called for 295,000. There was nothing unusual in the data and no states were estimated, a spokesman said as the figures were released.

The dollar has gained 1.2 percent in the past month, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies, the most after Norway’s krone at 2.3 percent. The euro lost 0.4 percent and the yen climbed 0.4 percent.

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