Yen Gains to Two-Month High Versus Euro; Krone Slumps With Oil

The yen climbed to the strongest level in two months versus the euro and bonds rose worldwide as a slump in crude oil stoked demand for haven assets.

The 19-nation shared currency dropped against most main peers as Greece prepares for an election that the country’s leader said may lead to it exiting the currency union. Norway’s krone slumped to a three-week low as a report showed manufacturing in western Europe’s biggest oil producer shrank. The ruble tumbled while the dollars of Australia and New Zealand gained. Yields on global sovereign debt of nations such as Australia slid to record lows.

“The euro will continue to grind lower,” Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said by phone. “The Greek election taking place later this month simply adds another cog to this already solidly negative fundamental story.”

Japan’s currency gained 1.4 percent to 140.77 per euro as of 5 p.m. New York time after reaching 140.75, the strongest since Nov. 3. The yen advanced 1 percent to 118.39 per dollar. The dollar rose 0.4 percent to $1.1890 per euro.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was little changed at 1,143.01 after closing yesterday at 1,143.40, the highest in data going back to 2009.

Record Lows

U.S. Treasuries rose for a seventh day today, pushing 10-year yields below 2 percent for the first time since October, as yields fell to records from Japan and Australia to Germany and the U.K.

Crude-oil futures tumbled for a fourth day and touched $47.55 a barrel in New York, the lowest since April 2009.

Norway’s krone dropped as a purchasing managers’ index fell to 49.8 in December from 51.4 in November,the Association of Logistics and Materials Management and Danske Bank A/S said today. That missed the 50.5 estimate in a survey of economists. A reading below 50 indicates a contraction.

The krone fell 1.4 percent to 7.7467 per dollar, having depreciated to 7.7619, the weakest since Dec. 16.

The ruble dropped as the cost of insuring Russian bonds against default rose to the highest level in almost six years on concern a cut in the nation’s credit rating to junk is imminent.

The currency slipped 3.9 percent to 63.24 to the dollar, adding to a slide of 8 percent yesterday. The ruble tumbled 46 percent against the dollar last year, the worst performance of global currencies after Ukraine’s hryvnia.

Aussie Gains

Australia’s dollar jumped with New Zealand’s as people familiar with the matter said China will speed infrastructure projects valued at 7 trillion yuan ($1.13 trillion). China is the largest trading partner for the two South Pacific nations.

The Aussie advanced as much as 0.9 percent to 81.58 U.S. cents, before closing little changed at 80.84 cents. The kiwi added 1 percent to 77.60 U.S. cents.

Japan’s currency strengthened for a third day versus the euro as Greeks prepare for a Jan. 25 election in which the opposition Syriza party has vowed to increase wages, expand the number of government jobs and persuade the euro area to write off some Greek debt.

In a Jan. 3 speech, Prime Minister Antonis Samaras said Greece would be driven into default and out of the 19-nation European single currency if Syriza wins.

‘Underlying Worries’

“The yen’s benefiting from lower yields and that flight to safety,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. “It’s not just oil and it’s not just Greece. There are underlying worries in the markets about the economic health of the euro zone.”

ABN Amro Bank NV cut its year-end forecast for the euro to $1.10 from $1.15 and expects the common currency to drop to parity by the end of 2016, Nick Kounis, the head of macro research based in Amsterdam, wrote in a client note. The performance will be driven by “sluggish” euro-area growth and divergence in monetary policy with the U.S., he wrote.

The yen has rallied 6.1 percent in the past month, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 3.4 percent, while the euro weakened 0.6 percent.

“The yen’s lost its status as the leading edge of the dollar appreciation -- the euro’s taken over,” Alan Ruskin, the global head of Group of 10 foreign exchange at Deutsche Bank AG, said by phone from New York. “While there’s talk of Greek-related uncertainty, European monetary union, risk is going to have a hard time.”

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