Yen weakens as investors seek riskier assets

Krone Rally

“Oil has been soft in recent months and therefore it takes some of the steam out of the Norwegian krone,” said Jane Foley, a senior currency strategist at Rabobank International in London. “We will see a pick-up in the Norwegian krone.”

Underlying consumer prices in Norway rose 2% in November from a year earlier, according to the median estimate of economists surveyed by Bloomberg News before the data tomorrow.

The Norwegian krone rose 0.2% to 8.4281 per euro after depreciating to 8.4513, the weakest since December 2009. It advanced 0.4% to 6.1417 per dollar.

The krone has fallen 7.1% in the past six months, the biggest drop among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 4% and the dollar lost 0.2%.

St. Louis Fed President James Bullard said on Nov. 20 a strong jobs report could increase the chances of slowing the pace of bond purchases this month. Dallas Fed President Richard Fisher, who will vote on policy next year, said on Dec. 5 the Fed at the start of tapering purchases should provide “a definite path as to when we reach zero.” Richmond Fed President Jeffrey Lacker is also scheduled to speak.

Dollar Positive

“You’re in this sweet spot for dollar-yen where the markets are beginning to believe tapering is coming but risk appetite is not being disrupted,” said Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “In a climate of risk appetite being strong into year-end and equities moving higher, that’s certainly supportive for the euro. The obvious trade is euro-yen.”

The Federal Open Market Committee will probably begin reducing $85 billion in monthly bond buying at the Dec. 17-18 meeting, according to 34% of economists surveyed on Dec. 6 by Bloomberg, an increase from 17% in a Nov. 8 poll.

“If Fed hawks Lacker and Fisher say something supportive of a December taper, it’ll trigger dollar buying, and we could test the May high in dollar-yen,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services, referring to the greenback’s five-year high of 103.74.

U.S. data last week showed the jobless rate dropped to a five-year low of 7% in November as employers added more workers than forecast.

“The global mood is really quite positive, given we have genuinely better signs on the U.S. economy and the prospect of a reduction in Fed QE is not enough to upset equities,” Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney, said of the U.S central bank’s quantitative easing program. “Yen weakness has been given another shot in the arm.”

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