Yen, euro jump as Europe bonds slide while U.S. stocks advance

The yen surged the most in two years and the euro jumped as Italian and Spanish bonds sank after European Central Bank President Mario Draghi said growth should return and more stimulus measures will be left “on the shelf.” U.S. stocks and Treasuries rose before tomorrow’s jobs data.

The yen rallied 2% to 97.09 per dollar and jumped as much as 3.2%, the most since 2011, while the 17-nation euro increased as much as 1.6% to a three-month high of $1.3306 at 3:42 p.m. in New York. Yields jumped more than 20 basis points on the 10-year debt of Italy, Spain and Portugal. The Standard & Poor’s 500 Index rose 0.6% to 1,618.64, rebounding from a one-month low, while the Stoxx Europe 600 Index retreated 1.2%. Ten-year U.S. Treasury yields declined one basis points to 2.08% after rising as much as four points earlier.

Japan’s currency strengthened against all 16 major peers as traders unwound bets on a weaker yen based on the Bank of Japan’s monetary stimulus plan. U.S. jobless claims declined last week before a report tomorrow projected to show payrolls grew, fueling debate over whether the Federal Reserve will plan to reduce bond purchases. The euro-area will return to growth by the end of the year, Draghi told a press conference after ECB policy makers left their benchmark rate at 0.5%.

“Draghi’s statement about no further stimulus weakened the U.S. dollar against the euro and the yen,” Donald Selkin, who helps manage about $3 billion of assets as the chief market strategist at National Securities Corp. in New York, said in a phone interview.

‘Third Arrow’

The yen aslo rallied more than 1.5% versus the Mexican peso, Brazilian real, Taiwanese dollar and South Korean won. Japan’s currency added to gains triggered yesterday after Prime Minister Shinzo Abe failed to provide additional detail on stimulus measures. Abe said a legislative campaign to loosen rules on businesses won’t begin for months as he outlined his “third arrow” of an economic revival plan.

Traders said today’s rally in the yen likely accelerated as the moves triggered so-called stop orders, which are set to automatically buy or sell an asset when it reaches pre-set levels.

“The weakness in dollar-yen, as the cross took out stops, pushed a positioning clear-out that took place across the G-10,” Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a telephone interview. “The catalyst of broad-based dollar weakness was dollar-yen breaking through some important levels on the downside, 98.80 and then 98.50.”

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