The yen fell to a two-week low against the dollar before U.S. reports that economists said will show consumer sentiment improved and business activity expanded, damping demand for the relative safety of Japan’s currency.
The yen dropped versus most of its major peers as Asian shares from Japan to China rallied after Federal Reserve officials sought to reassure investors they will keep providing stimulus to the world’s biggest economy. German retail sales increased more than economists forecast. South Africa’s rand fell as the central bank said the economic outlook was hampered by weakened consumer and investor confidence. India’s rupee gained.
“It’s risk-on,” Geoffrey Yu, a senior currency strategist at UBS AG in London, said in a telephone interview of the yen’s depreciation. “Clearly, it’s being led by Asian markets overnight, finally starting to perform.”
The yen fell 0.8% to 99.16 per dollar at 10:13 a.m. in New York after sliding to the weakest since June 10. Japan’s currency weakened 0.7% to 129.10 per euro after dropping 0.8% yesterday. The euro lost 0.1% to $1.3020.
Australia’s dollar declined 1.4% to 91.44 U.S. cents, reading its weakest level since Sept. 8, 2010.
The yen has gained 1.3% to the greenback this month, while Australia’s dollar has declined 4.4%. This quarter, the euro has led all major gainers with a 1.5% increase, while the worst-performing Aussie has slipped 12.2%. The greenback is the best-performing currency in 2013 and South Africa’s rand has plunged 15.4%.
India’s currency gained the most in nine months as investors reassessed projections for a reduction in U.S. stimulus. The rupee surged as much as 1.7%, the most since Sept. 21, before trading at 59.39 per dollar. That pared its drop this year to 7.4%.
The rand fell versus all except three of its 16 major peers as the South African Reserve Bank lowered its forecast for growth this year to 2.4% from 2.7%.
“The economy is facing a difficult time as it is buffeted by both global and domestic challenges,” the central bank said in its annual report released today in Pretoria. “The outlook is poor following the 0.9% annualized growth rate in the first quarter.”
The rand weakened 0.7% to 10.0125 per dollar, pushing its decline this quarter to 8.7%.
Fed Governor Jeremy Stein said he views “the fundamentals of our underlying policy stance as broadly unchanged.” The Fed is providing more clarity about how it will wind down its $85 billion in monthly bond buying as unemployment falls toward 7%, he said.
The Thomson Reuters/University of Michigan said its final index of confidence eased to 84.1 this month from 84.5 at the end of May, which was the highest since July 2007. The median forecast in a Bloomberg survey of economists called for 83 in the gauge after a preliminary reading of 82.7.
The yen has slumped 8.2% this year, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar gained 6.5% and the euro strengthened 4.9%.
“Risk appetite is putting downward pressure on the yen,” said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “Fears about liquidity and growth in China have also receded a bit so the sentiment has been quite bullish in equities in the past two or three days.”
Chinese stocks advanced for the first time in eight days as People’s Bank of China Governor Zhou Xiaochuan pledged to maintain money-market stability, easing concern the nation is facing a cash crunch.
“The safe-haven support for the yen is fading,” BNP Paribas SA currency strategists Vassili Serebriakov and Daniel Katzive in New York wrote in a research note. “We continue to see significant gains in dollar-yen over the next six months targeting 108 by year-end.”
The euro rose versus most of its 16 major counterparts as Germany’s Federal Statistics Office said retail sales climbed 0.8% in May, surpassing the prediction of 0.4% in a Bloomberg News survey.
“Investors are finding it hard to sell the euro and there’s a growing realization of that,” UBS’s Yu said.
The retail sales growth follows reports this month showing German unemployment unexpectedly declined in June, while the Ifo institute’s measure of business confidence climbed for a second month and ZEW’s investor sentiment index increased.
The Bloomberg U.S. Dollar Index, which tracks the dollar against 10 major currencies weighted by liquidity and trade flows, gained 0.4% to 1,041.04, increasing this week’s advance to 0.6%.