Yen jumps most in 3 months as risk appetite shrinks

‘Fundamentals Fit’

“It was more so some price action that moved the yen, and the fundamentals that we got after fit into that narrative,” Brian Kim, a foreign-exchange strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a telephone interview. “People are still looking for a weaker yen.”

A gauge of Chinese factory output declined to 49.6 in May from 50.4 the previous month, HSBC Holdings Plc and Markit Economics said today. Readings below 50 indicate contraction.

“There’s been a violent move in the yen today on the back of the drop in stocks,” said Kasper Kirkegaard, a senior currency strategist at Danske Bank A/S in Copenhagen. “People are also starting to question the sustainability of the recent improvement in China. There’s definitely potential for more short-term noise.”

The yen has tumbled 12% this year, the worst performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro advanced 2.7% and the dollar climbed 5.1%.

Net Sellers

Japanese investors were net sellers of foreign bonds during the week ended May 17, according to figures based on reports from designated major investors released by the Ministry of Finance in Tokyo. They were net buyers a week earlier.

The investors sold 804.4 billion yen ($7.8 billion) last week in overseas bonds and notes, sold 136.9 billion yen in overseas stock and sold 102.1 billion yen in overseas short term securities for a total net sale of 1.043 trillion yen.

The Federal Reserve will take steps to reduce the pace of its monthly bond purchases once it sees increased confidence that the labor market is improving, Chairman Ben S. Bernanke told U.S. lawmakers yesterday in Washington.

The Swiss franc rose as the prospect of a reduction in U.S. monetary stimulus boosted demand for haven assets.

The currency climbed 0.6% to 1.2511 per euro after gaining as much as 1.3%, the most since Sept. 5, 2011. The Swiss National Bank imposed a cap of 1.20 francs per euro on Sept. 6, 2011, to protect exporters. The franc strengthened 1.2% against the dollar today to 96.70 centimes.

‘Risk-Off’

“Bernanke’s comments turned markets to a risk-off mode and are pushing investors toward haven currencies,” said Peter Rosenstreich, chief foreign-exchange analyst at Swissquote in Geneva. Today’s advance in the currency is also related to its decline yesterday, he said.

The franc slid to 1.2650 per euro yesterday, the weakest since May 2011, as SNB President Thomas Jordan said a shift of the currency cap was in the SNB’s toolkit.

South Africa’s rand erased losses, ending a 10-day losing streak that was its longest since June 2008, after the nation’s central bank kept its benchmark interest rate unchanged at 5%. The currency gained 0.2% to 9.5545 per dollar after falling 1.3% to 9.6948, the weakest since 2009.

Australia’s dollar rose 0.4% to 97.39 U.S. cents after sliding 1.1% to 95.94, the lowest since June 2012.

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