Yen Gives Up Gains as Higher Oil Prices Damp Demand for Havens

  • Australian, Canadian dollars climb with commodity prices
  • Fed publishes minutes of January FOMC meeting later Wednesday

The yen erased an advance as oil prices climbed, boosting stocks and diminishing the appeal of haven assets.

Currencies of commodity producing nations from Australia to South Africa and Canada gained alongside raw-materials prices. Even so, the yen failed to wipe out a rally from Tuesday as traders remained cautious about the outlook for the global economy. A gauge of the dollar halted a four-day gain before minutes of the Federal Reserve’s January meeting.

“Higher oil means a better risk mood,” which undermines the yen, said Alvin T. Tan, a London-based strategist at Societe Generale SA. “Also, higher oil helps commodity linked currencies such as the Canadian dollar.”

“The markets are very nervous, and the mood remains fragile to be sure,” he said. “Volatility in foreign exchange remains quite elevated.”

The yen was little changed at 114.14 per dollar as of 6:58 a.m. in New York, after climbing as much as 0.6 percent earlier and advancing 0.5 percent on Tuesday. The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, was little changed after rising 0.9 percent in the previous four days. Crude prices jumped for the second time in three days.

Aussie, Loonie

Australia’s dollar was up 0.2 percent at 71.26 U.S. cents, while Canada’s strengthened 0.3 percent to C$1.3830 to the greenback. The Bloomberg Commodity Index, which measures returns for 22 components, rose 0.4 percent.

The yen has still been the biggest gainer versus the dollar this year as investors sought the safest assets amid the global market turmoil.

Traders who have reduced bets the Fed will raise interest rates this year have also pushed the dollar lower. Investors will be monitoring U.S. data on inflation, housing and industrial production this week for clues on how policy might pan out.

The euro has been the second best-performer against the dollar this year. The European Central Bank and Bank of Japan both face the challenge of stronger exchange rates hampering their goals of boosting growth and inflation, encouraging speculation they’ll intervene or expand monetary stimulus to arrest their currencies’ gains.

The euro was little changed at $1.1144, leaving it up 2.6 percent this year.

“Global central banks are not really making a case for increasing liquidity expectations,” said Manuel Oliveri, a currency strategist at Credit Agricole SA’s corporate and investment-banking unit in London. ECB officials “did sound dovish” in recent appearances, “but not as dovish as before, and at the same time the Fed is also sounding more cautious on the economy. So overall the market is cautious toward risk, and this is something which is positive for the yen.”

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