The yen strengthened toward a two- week high against the dollar as a slowdown in Chinese services and a slide in Asian stocks boosted demand for safer assets.
The dollar extended losses after the Institute for Supply Management’s non-manufacturing index unexpectedly decreased in December. The euro climbed from a one-month low against the dollar after an industry report confirmed the region’s services output expanded for a fifth month in December. South Korea’s won fell the most in six months on bets the central bank will cut interest rates to spur growth. South Africa’s rand strengthened.
“The China data is a very minor print -- the market is clinging a bit too much to that one,” Geoffrey Yu, a senior currency strategist at UBS AG in London, said in an e-mail message. “Seeing some profit-taking, but broader direction is unchanged.”
The yen rose 0.2% to 104.67 per dollar at 10:13 a.m. in New York after climbing to 104.08 on Jan. 3, the strongest since Dec. 23. Japan’s currency advanced 0.1% to 142.64 per euro. The euro gained 0.3% to $1.3626 after dropping to $1.3572, the weakest level since Dec. 5.
The ISM non-manufacturing index decreased to 53 last month from 53.9 in November, a report from the Tempe, Arizona-based group showed today. The median projection in a Bloomberg survey of 69 economists was 54.7. Estimates ranged from 53 to 57.7. Readings above 50 indicate growth in the industries that make up 90% of the economy.
Japan’s currency advanced versus most of its 16 major counterparts amid speculation its 18% slump versus the greenback last year was excessive.
A China services purchasing-managers’ index fell to 50.9 last month from 52.5 in November, HSBC Holdings Plc and Markit Economics said. The data followed reports last week that showed official gauges of the nation’s manufacturing and services industries dropped to four-month lows in December.
The MSCI Asia Pacific Index of shares declined 0.9% and the Shanghai Composite Index slid 1.8%.
The yen extended gains from last week even after Bank of Japan Governor Haruhiko Kuroda said in an interview with the Yomiuri newspaper on Jan. 1 the central bank won’t necessarily end or scale back its stimulus program in two years. Japan’s currency slid the most since 1979 versus the dollar last year.
“Expectations of additional monetary easing from the BOJ were so strong that people have sold the yen too much,” said Koji Fukaya, chief executive officer and currency strategist at FPG Securities Co. in Tokyo. “There’s profit-taking” after the currency’s slump last year, he said.
The yen has dropped 14% in the past 12 months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar climbed 3.5% and the euro advanced 8.4%.
The euro rose for the first time in three days against the dollar as Markit Economics said its services index, based on a survey of purchasing managers, was 51 last month from 51.2 in November. That’s in line with an initial estimate on Dec. 16. A reading above 50 indicates expansion.
South Korea’s won weakened for a second day versus the dollar, dropping 1% to close at 1,065.42, the biggest decline since June 20. The currency jumped 7.2% against the greenback in the past six months.
The strong won is contributing to tighter monetary conditions that may hurt the recovery and prompt the central bank to cut its policy rate at a meeting this week, Goldman Sachs Group Inc. said in an e-mailed note.
“The early trend to the year appears to have been to liquidate or take profit on trades that did quite well through the second half of 2013,” said Jonathan Cavenagh, a strategist at Westpac Banking Corp. in Singapore. The won still looks “expensive” at these levels, he said.
South Africa’s rand climbed 1.1% to 10.6397 per dollar after sliding to 10.76 on Jan. 3, the weakest since November 2008. The currency tumbled 19% last year.
The Bloomberg Dollar Spot Index fell after rising to a four-month high last week when Federal Reserve Chairman Ben S. Bernanke said headwinds for the U.S. economy may be abating. The central bank said on Dec. 18 it would trim bond buying by $10 billion a month starting in January.
Economists say U.S. reports today will show services expanded in December and factory orders rose in November.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, dropped 0.1% to 1,024.80 after climbing to 1,029.67 on Jan. 2, the highest since Sept. 9.