Yen Rallies as Oil Drops Before Exporters Meet in Doha

  • Currency's upside curbed by intervention bets: Credit Agricole
  • Don't expect too much from gathering, says CIBC's Stretch

The yen rallied, halting a three-day decline, as a drop in oil in the run-up to the OPEC meeting in Doha this weekend prompted investors to seek safer assets.

With speculation mounting that the talks will fail to secure an output freeze, U.S. crude trimmed a second weekly advance and shares in Europe fell for the first time in six days. The yen has climbed more than 10 percent versus the dollar this year, the best performance among its Group-of-10 peers, as a slowing world economy boosts its appeal as a haven.

“All eyes are on Doha,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The recent rebound in risk sentiment which has favored a higher dollar against the yen is under a little bit of pressure because of that. I wouldn’t expect too much from the meeting though.”

Oil has become a key driver of currencies this year, making the Doha meeting crucial for traders of foreign exchange as well as commodities. Currencies of nations reliant on exporting crude, such as the Russian ruble and Colombian peso, will be particularly vulnerable if the world’s biggest suppliers fail to reach an agreement, while a stalemate may boost the yen, which is favored in times of trouble because of Japan’s current-account surplus.

Intervention Hints

The yen gained 0.5 percent to 108.86 per dollar as of 8 a.m. in New York. Its advance to a 1 1/2-year high of 107.63 on April 11 prompted Japanese officials to suggest they may intervene if the strong exchange rate hurts their efforts to boost growth and inflation.

The Bank of Japan has been trying to kick-start the economy through unprecedented monetary easing, which weakened the yen until last June, when oil started a slide that saw it lose more than half its value by late-January.

“With the yen undervaluation largely corrected following the recent rally, and given implicit endorsement of further BOJ easing at the G-20 meeting” in Washington this month, “I would think the upside on the yen will be limited,” said Valentin Marinov, head of G-10 foreign-exchange strategy at Credit Agricole SA’s unit of corporate and investment-banking unit in London.

Before it's here, it's on the Bloomberg Terminal.