Yen gains for a third day vs. dollar as Chinese growth slows

The yen climbed for a third day against the dollar (FOREX:USDJPY) as a report showed China’s economic growth slowed in the fourth quarter, boosting demand for the Japanese currency as a haven.

The yen rose (CME:J6H14) versus most of its 16 major peers as equities slid. Chinese gross domestic product rose 7.7% in the October-December period from a year earlier, the National Bureau of Statistics said in Beijing, compared with 7.8% in the third quarter. The median estimate of analysts in a Bloomberg News survey was for an increase of 7.6%. The dollar weakened against the euro after reaching an eight-week high. U.S. stocks and bonds are shut today for a public holiday.

“The market is concerned about the outlook for Chinese growth given the need to implement structural reforms,” said Jane Foley, a senior currency strategist at Rabobank International in London. “Risk aversion is clearly a factor and this supported the yen.”

The yen climbed 0.3% to 104.01 per dollar at 3:17 p.m. London time. The dollar was 0.1% weaker at $1.3560 per euro after appreciating to $1.3508, the strongest level since Nov. 25. The yen gained 0.1% to 141.06 per euro.

The MSCI Asia Pacific Index of stocks declined 0.2% and the Stoxx Europe 600 Index slipped 0.1%.

The yen has gained 2.5% this year, the best performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 1.2%, while the euro weakened 0.3%.

Currency Forecasts

The U.S. currency will rise to 110 yen and strengthen to $1.28 per euro by the end of the year, according to median forecasts of economists compiled by Bloomberg. A Citigroup Inc. gauge last week showed U.S. economic data were surpassing expectations by the most in almost two years.

Federal Reserve policy makers said on Dec. 18 they would cut monthly bond purchases to $75 billion from $85 billion starting in January, with the pace of further reductions dependent on the performance of the economy. Officials are due to next meet on Jan. 28-29.

“Our view on the U.S. is that it will deliver stronger and more consistent growth in 2014 than in the previous three years,” said John Normand, head of foreign-exchange and international-rates strategy at JPMorgan Chase & Co. in London. “The strength of the economy will allow the Fed to taper further. The dollar is likely to advance the most against currencies whose central banks are still easing and where current account positions are poor.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, fell 0.2% to 1,030.24 after rising to 1,032.84 on Jan. 17, the highest level since Sept. 9.

Economists say American reports on Thursday will show first-time claims for jobless benefits increased last week, while sales of previously owned homes rose for the first time in five months in December.

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