Yen Gains After IMF Cuts Growth Outlook; Real Climbs

Japan’s currency rose versus all but one of its 16 major peers after the International Monetary Fund cut its forecast for global growth, fueling demand for haven assets.

The euro slipped versus the yen as German industrial production fell the most since 2009, while the U.S. dollar dropped amid speculation Japanese officials are growing uncomfortable with the pace of the yen’s depreciation. Australia’s currency rose after the central bank held interest rates unchanged. Brazil’s real advanced.

“The IMF is making headlines,” said Dave Floyd, global head of foreign-exchange research in Bend, Oregon, at Aspen Trading Group. “That weighs on the market and the yen is strengthening as a typical safe-haven currency.”

Japan’s currency advanced 0.7 percent to 108.03 per dollar as of 5 p.m. New York time, after gaining 0.9 percent yesterday. It reached 110.09 per dollar on Oct. 1, the weakest level in six years.

The euro fell 0.6 percent to 136.86 yen. The shared currency rose 0.1 percent to $1.2669. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, slipped 0.2 percent to 1,066.92 after dropping 0.9 percent yesterday, the most since Sept. 18, 2013.

Real, Aussie

Brazil’s real was the biggest gainer of the U.S. currency’s 16 major peers on speculation presidential candidate Aecio Neves will receive the endorsement of a former rival in this month’s runoff election against incumbent Dilma Rousseff. The currency gained a third day, adding 1.2 percent to 2.3966.

Australia’s dollar appreciated a second day as the Reserve Bank pointed to an improvement in private demand after keeping policy settings steady. The RBA left the benchmark interest rate at a record-low 2.5 percent today and reiterated it sees a likely period of interest-rate stability.

The currency advanced 0.6 percent to 88.17 U.S cents. It rallied 1 percent yesterday, the most since March 6, rising from a more than four-year low set last week.

The euro slumped as much as 0.6 percent after industrial production in Germany dropped 4 percent in August from the previous month, when it increased a revised 1.6 percent. A report yesterday showed German factory orders also plunged the most since 2009.

“Any time Germany even sneezes the rest of the euro zone catches a cold, so that’s the primary reason why the euro is certainly being a bit more flaky,” said Kathleen Brooks, European research director at Forex.com in London. “If it doesn’t dip into recession, it could probably register a quarter of negative growth.”

IMF Forecast

The world economy will grow 3.8 percent next year, compared with a July forecast for 4 percent expansion, the IMF said today. The euro area will grow 1.3 percent next year, slower than the 1.5 percent pace predicted in July, while Japan will expand 0.8 percent, less than the 1.1 percent forecast in July.

The U.S. is seen expanding 3.1 percent, compared with a 3 percent pace forecast in July, the IMF said. U.S. job vacancies rose more than forecast, a report from the Bureau of Labor Statistics showed today, as employers gained confidence about the outlook for the world’s biggest economy as the Federal Reserve moves toward the first interest-rate increases since 2006.

Fed Comments

New York Fed President William Dudley said forecasts for a mid-2015 rate increase are “reasonable,” in a speech in Troy, New York.

Labor market outcomes have however been “distressingly weak,” Narayana Kocherlakota, president of the Fed Bank of Minneapolis said in Rapid City, South Dakota, today. As long as the inflation outlook remains sluggish, “it would be inappropriate for the FOMC to raise the target range for the fed funds rate” in 2015, he said.

Japan’s currency rose for the first time in three days against the euro as Bank of Japan Governor Haruhiko Kuroda said the central bank will closely monitor the exchange rate and Prime Minister Shinzo Abe said its weakness is hurting small companies and households.

“Official comments have voiced some sympathy towards importers and smaller companies having to pay a higher price for overseas materials and energy,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. “This is causing investors to liquidate short yen positions.” A short position is a bet an asset’s price will decline.

The BOJ, which buys about 7 trillion yen ($65 billion) of government bonds a month, kept its asset-purchase stimulus program unchanged after a meeting today. The decision was predicted by all 33 economists surveyed by Bloomberg News between Sept. 26 and Oct. 2. Four of them expect the central bank to announce additional stimulus on Oct. 31.

The yen climbed 0.7 percent in the past week, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes after the Aussie, as investors bet officials were seeking to talk down the pace of recent declines.

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