Yen Gains on Trade Surplus as Dollar Rally Unwinds; Euro Weakens

  • Japan ministry worried about U.K. vote impact on yen: BofA
  • Euro-area factories, services index at lowest since Jan. 2015

U.S. Spars With Japan Over Yen at G-7

The yen advanced versus 15 of its 16 major peers after a government report showed Japan’s trade surplus unexpectedly swelled to the biggest in six years.

The currency strengthened from a three-week low versus the dollar as Japanese and U.S. finance chiefs remained divided over whether yen-selling intervention was warranted following Group of Seven meetings on the weekend. U.S. Treasury Secretary Jack Lew reiterated his view that the yen’s movement hasn’t been overly volatile. The euro fell against the dollar as data showed manufacturing and services growth weakened, supporting the case for the European Central Bank’s monetary policy easing.

“There has been some attribution of the supportive trade data to the stronger yen,” said Ned Rumpeltin, European head of currency strategy at Toronto Dominion Bank in London. “The yen also benefits from the markets fading the recent dollar-yen rally as they continue to calibrate their Fed expectations. The dollar is too strong against the yen relative to fundamentals. We are not looking for the Fed to move until September.”

The yen appreciated 0.6 percent to 109.47 per dollar at 8:41 a.m. in New York after touching 110.59 on May 20, the weakest level since April 28. The currency strengthened 0.8 percent to 122.66 per euro.

Fed Speeches

Several regional Fed presidents have said this month that an interest-rate increase may be possible in June or July, though there’s been no recent public comment from Fed Chair Janet Yellen, who is scheduled to speak at Harvard University on May 27.

The Bloomberg Dollar Spot Index, which measures the U.S. currency against 10 peers was little changed.

The euro fell 0.2 percent to $1.1207 and was little changed at 77.46 British pence. The euro-area composite index for manufacturing and services dropped to 52.9 in May, the lowest reading since January last year, according to a report published on Monday.

Japan’s Finance Ministry is concerned about the impact on the yen from the U.K.’s June referendum on its European Union membership and the possibility of an interest-rate increase in the U.S. as early as June, said Claudio Piron, Singapore-based co-head of Asia currency and rates strategy at Bank of America. Fed Bank of Boston President Eric Rosengren, who votes on policy changes, told the Financial Times at the weekend that he’s getting closer to backing tighter U.S. monetary policy.

“Such a risk-off situation could lead to an abrupt downside move in dollar-yen which would be very much of concern,” Piron said in a Bloomberg Television interview.

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