Yen Boosted as Stocks, Commodities Rout Drives Aussie Lower

  • Dollar-yen one-month implied volatility gains to two-week high
  • South Africa's rand touches record low versus dollar

The yen strengthened for a second day versus the dollar as investors fled to the safest assets amid an extension of Monday’s $800 billion slump in stocks.

One-month implied volatility of the Japanese currency against the dollar, a measure of anticipated price swings in the exchange rate based on options, climbed to a two-week high. The Australian dollar dropped for a second day as commodities and associated stocks tumbled amid concern China’s economy will continue to slow, while South Africa’s rand fell to a record.

“The yen is likely to face upward pressures from deteriorating risk sentiment amid Chinese economic risks and other uncertainties,” said Kenji Yoshii, a currency strategist at Mizuho Securities Co. in Tokyo.

Japan’s currency appreciated 0.1 percent to 119.80 per dollar at 9:14 a.m. London time after jumping 0.6 percent on Monday. Its one-month implied volatility rose to 11.20 percent, set for the highest closing level since Sept. 15. The yen was little changed at 134.89 per euro.

Support for the yen was boosted by investors seeking to repatriate funds before the quarter ends, according to Keisuke Hino, a foreign-exchange trader at Mizuho Bank Ltd. in New York.

“Seasonal flows may support buying of home currencies,” he said.

Risk Sentiment

The MSCI Asia Pacific Index of stocks sank 3 percent after the Standard and Poor’s 500 Index tumbled 2.6 percent Monday. Shares in Australia’s biggest mining companies fell as the collapse in Glencore Plc’s stock highlighted the risk of sliding commodity prices amid weakening Chinese demand.

The Bloomberg Commodity Index has plunged 15 percent since the end of June, headed for the biggest quarterly drop since 2008.

The Aussie fell 0.2 percent to 69.77 U.S. cents. New Zealand’s dollar dropped as much as 0.6 percent before strengthening 0.3 percent to 63.46 U.S. cents. The rand weakened as much as 0.7 percent to 14.1588 per dollar.

“The equities selloff appears to be driven by resource stocks, and is having an impact on currencies whose export profile is commodity-heavy,” said Sam Tuck, senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland. “The Australian and New Zealand dollars are being driven lower by risk sentiment.”

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