Yen Falls as Haven Appeal Dulled by Recovery in Crude, Stocks

  • Oil rise pushes Aussie and Kiwi to highest levels in 10 months
  • Dollar weighed down by dovish Fed monetary policy outlook

The yen weakened against all of its 16 major peers as a recovery in stocks and commodities prompted investors to opt for riskier assets over havens.

Currencies of commodity-exporter nations such as New Zealand and Australia rose among Group-of-10 counterparts, both reaching levels not seen in 10 months versus the dollar, after oil advanced for the first time in five days and European stocks rallied to a three-month high. The yen, often used by investors as a haven in times of market turmoil, is still stronger versus all of its 16 major peers this year.

“We are very much in a kind of risk-on phase,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “So there’s a further buildup in long commodity and emerging-market currency positions and risk assets are climbing back towards highs of the year.”

Going long on a currency means betting on its appreciation.

The yen depreciated 0.5 percent to 109.40 per dollar as of 6:33 a.m. New York time. The U.S. currency weakened 0.2 percent to $1.1335 per euro, set for a third day of declines.

Australia’s currency climbed 0.5 percent to 77.89 U.S. cents, after earlier reaching 78.03, the highest level since June 19. The New Zealand dollar advanced 1.1 percent to 70.23 U.S. cents, and touched 70.28, the strongest since June 12.

Dovish Fed

The dollar has declined against all except two of its 16 peers this year as markets continue to pare back expectations of when the Federal Reserve will tighten monetary policy. Fed Chair Janet Yellen urged caution last month and called for a slow approach to increasing interest rates.

“The more dovish Fed policy stance is encouraging dollar weakness in the near term,” BTMU’s Hardman said. Recent comments from Yellen have “made the market even more skeptical that the Fed will carry ahead with their planned rate hikes going forward.”

Futures contracts indicate traders see a 49 percent chance that the Fed will raise rates this year, down from a 68 percent probability assigned a month ago. The calculation assumes the effective fed funds rate will average 0.625 percent after the Fed’s next increase.

The Federal Open Market Committee is scheduled to gather in Washington next week to share their outlook on the economy and set the benchmark federal funds rate. Forecasts released at the March 15-16 meeting showed officials had halved the number of rate increases they expect this year, from four projected in December. Investors put the chance of an April rate increase at zero.

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