Yen falls on reduced haven demand as stocks rally

Stocks Rally

The Stoxx Europe 600 Index of shares gained 1.2% while Japan’s Topix index added 2.7% and the Standard & Poor’s 500 Index climbed 1%.

“Some of the calm in markets today and strengthening of Japanese equities play negatively for the yen,” said Mitul Kotecha, the global head of foreign-exchange strategy in Hong Kong at Credit Agricole Corporate & Investment Bank.

Fed Chairman Ben S. Bernanke said on May 22 the central bank could reduce its monthly purchases of $45 billion of Treasuries and $40 billion of mortgage-backed securities, known as quantitative easing, if the employment outlook shows sustained improvement.

The Dollar Index, which Intercontinental Exchange Inc. uses to monitor the greenback against the currencies of six U.S. trade partners, rose 0.1% to 80.734.

Price Swings

The JPMorgan Global FX Volatility Index rose to a one-year high of 11.43% on June 13. The gauge has climbed from 7.05% in December, the lowest since July 2007, and was at 10.3% today.

“The price action in the yen is being driven by equity volatility,” said Peter Kinsella, a currency strategist at Commerzbank AG in London. “The next move higher in dollar-yen will be either because of an improvement in equity-market sentiment or because we see a more broadly stronger dollar. I expect the dollar to rally and it’s a question of when, not if.”

Benchmark 10-year Treasury yields have swung between this year’s low of 1.61% on May 1 and a high of 2.29% on June 11 as investors debated the central bank’s policy move. The rate was at 2.12% today.

The U.S. consumer-price index rose 0.2% in May after falling 0.4% in April, according to the median forecast of 73 economists in a Bloomberg News survey before the Labor Department releases the figures tomorrow.

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