The yen weakened versus all of its 16 most-traded counterparts as stocks around the world gained, reflecting reduced haven demand.
The dollar advanced versus the Japanese currency before the Federal Reserve starts a two-day policy meeting tomorrow, as investors weigh whether the central bank will curb bond purchases. Australia’s dollar rose against all except one of its major peers amid demand for higher-yielding assets. The euro climbed against the yen as data showed the 17-nation bloc’s trade surplus was at almost a record high in April.
“It looks like there’s some risk-on back on the table,” said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc., by phone from New York. “The obvious focus on the week is going to be the Fed meeting, and I think we’re going to sidestep around that until then.”
The yen declined 0.6% to 94.90 per dollar at 10:24 a.m. New York time, after rising 3.3% last week, the most since July 2009. Japan’s currency slid 0.8% to 126.60 per euro after appreciating 2.7% last week, the most since the five days ended July 6. The dollar was little changed at $1.3340 per euro.
Trading in over-the-counter foreign-exchange options totaled $11.3 billion, compared with $34.6 billion on June 14, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate was $3.8 billion, the largest share of trades at 33%. Dollar-pound options were the second most-actively traded, at $1.2 billion, or 11%.
Yen-dollar options trading was 13% less than the average for the past five Mondays at a similar time in the day. Dollar-pound options trading was 83% more than average.
India’s rupee dropped the most in a week as the central bank left borrowing costs unchanged amid concern U.S. monetary policy makers will signal a reduction in asset purchases that have boosted inflows to emerging markets.
The Reserve Bank of India held its repurchase rate at 7.25% today. The rupee slid 0.6% to 57.8663 per dollar, the biggest drop since June 10.
South Korea’s currency recovered from almost a two-month low after the government said it has several market-stabilizing measures ready to protect against external shocks. The won fell as much as 0.3% before closing unchanged on the day at 1,126.25 per dollar.
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.
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.
The yen has fallen 7.2% this year, the worst performer among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has risen 2.6% and the euro gained 3.9%.
The euro-area trade surplus narrowed to 16.1 billion euros from a revised 18.1 billion euros in March, the European Union’s statistics office in Luxembourg said today. The March reading was the most since the common currency was introduced in 1999.
Australia’s dollar extended its first weekly gain against the greenback in six weeks, amid speculation record bets on its decline are overdone.
“Positioning is at record extremes” in the Australian dollar, said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. Trading “should remain largely choppy, but there’s a risk of potential short-covering,” she said. A short position is a bet an asset’s price will fall.
The Aussie rose 0.2% to 95.85 U.S. cents. It gained 1% to 90.98 yen after dropping to 88.94 on June 13, the least since Dec. 31.