Yen Gains to 4-Month High as Retail Sales Add to Global Concern

  • Equities, oil selloffs drive investors to seek safe assets
  • Japan's currency gains 1% versus dollar while euro climbs

The yen rallied to the strongest since August as U.S. retail sales declined in December, fueling concern American consumers won’t drive economic growth when other sectors of the economy are slowing.

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The Japanese currency, which tends to benefit when investors seek safe assets, rose against all of its 16 major peers. The dollar and the euro rose against most of their biggest counterparts, reflecting haven demand as stocks and crude oil extended losses. Higher-yielding currencies slumped, led by South Africa’s rand and the Mexican peso.

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“It’s a safe haven, so the yen is the obvious trade,” said Lee Ferridge, the head of macro strategy for North America at State Street in Boston, which oversees $2.4 trillion.

Global financial markets were roiled this year as Chinese policy makers struggled to stabilize stocks and the yuan while commodity prices slid. Some analysts are becoming more concerned that turmoil in international markets will jeopardize the U.S. economy. 

The median probability for a U.S. recession in the next 12 months jumped to 19 percent in this month’s Bloomberg survey of economists, the highest since February 2013.

The yen rose 0.9 percent to 116.98 per dollar as of 5 p.m. in New York. It touched the strongest level on an intraday basis since Aug. 24. The euro gained 0.5 percent to $1.0916 per dollar.

"A few times this week you can sense the market’s trying get risk-on again, and quickly it got knocked in the head," said Daragh Maher, head of currency strategy for HSBC Holdings Plc in New York. "I’d say sell dollar-yen, buy euro-dollar until we get some other directions to get us more risk-on again."

The 0.1 percent drop in U.S. retail sales matched the median forecast of 84 economists surveyed by Bloomberg and followed a 0.4 percent gain in November, Commerce Department figures showed. For all of 2015, purchases climbed 2.1 percent, the smallest advance of the current economic expansion.

“This risk-off environment has largely been driven by China, but also the weak economic data globally,” said Calvin Tse, co-head of U.S. currency strategy for Morgan Stanley in New York. The bank recommends bullish positions on the yen, euro and dollar, which are supported by haven flows, he said.

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