Yen rises to 3-month high

The yen strengthened to a three-month high against the dollar as concern global economic growth remains sluggish prompted demand for haven assets.

Japan’s currency advanced for a fourth day as the yield premium 10-year U.S. Treasuries offer over similar-maturity Japanese government bonds traded at almost a seven-month low. India’s rupee climbed to an 11-month high versus the dollar as the clearest election results in three decades boosted investor confidence in the nation. Sweden’s krona weakened to a four-week low versus the dollar as unemployment rose in April.

The yen is gaining amid “kind of a Monday morning panic,” Peter Gorra, head of foreign-exchange trading in New York at BNP Paribas SA, said in a phone interview. “People read the press over the weekend and they get a little bearish. Treasuries that are supposed to, yield wise, stay flat to trade higher now seem to be putting new momentum to the downside, which is causing a growth scare.”

The yen strengthened 0.3 percent to 101.19 per dollar at 10:21 a.m. New York time, and reached 101.10 earlier, the strongest since Feb. 5. Japan’s currency appreciated 0.1 percent to 138.87 per euro after touching 138.67, the strongest level since Feb. 7. The euro rose 0.2 percent to $1.3725 after falling to $1.3648 on May 15, the lowest since Feb. 27.

 

ECB Watch

The euro briefly pared gains as Yves Mersch, European Central Bank executive board member, said “we have the tools to further loosen our monetary policy.” He said the probability of ECB action in June has increased.

ECB President Mario Draghi has signaled officials may add monetary stimulus next month because policy makers are “dissatisfied” with the inflation outlook, in part due to an increase in the exchange rate. The ECB meets June 5.

JPMorgan Chase & Co.’s Global FX Volatility Index fell to 6.35 percent. It declined to 6.21 percent on May 9, the lowest level since 2007.

Malaysia’s currency reached a five-month high after the nation’s economic growth and current-account surplus beat forecasts. The ringgit rallied 0.7 percent, the biggest gain in a month, to 3.2108 per dollar.

 

Ruble Rally

Russian stocks and the ruble extended last week’s rally as President Vladimir Putin ordered troops near Ukraine’s border back to base, signaling a possible easing of tensions before presidential elections in six days.

The currency strengthened 0.7 percent to 40.2740 against the central bank’s target dollar-euro basket.

The yen advanced versus all 16 of its major peers.

The difference between U.S. Treasuries 10-year and similar- maturity Japanese yields narrowed two basis points, or 0.02 percentage point, to 1.92 percentage points, after shrinking to 1.89 percentage points on May 15, the least since October, based on closing levels.

The MSCI Asia Pacific Index of shares dropped for a second day, declining 0.3 percent, and the Stoxx Europe 600 Index fell 0.4 percent.

“Equities are remaining under pressure, which is helping to support the yen,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Commerce in London. “There are a number of uncertainties out there. The spread between Treasuries and JGBs is also relevant to dollar-yen.”

 

Fed Policy

The Federal Reserve will release minutes of its April 29-30 meeting on May 21. At that gathering the Federal Open Market Committee reduced monthly bond buying to $45 billion, down from $85 billion when the Fed started trimming purchases in December. Fed Chair Janet Yellen is scheduled to give the New York University Commencement speech on the same day.

The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, fell 0.2 percent to 1,006.56 after climbing to 1,011.43 on May 15, the highest since May 2.

Narendra Modi’s Bharatiya Janata Party won 282 of 543 parliamentary seats, more than the 272 needed to form a government, according to India’s Election Commission. The BJP has garnered the nation’s first single-party majority since 1984.

The rupee rose 0.3 percent to 58.5950 per dollar after touching 58.3750, the strongest level since June 18, according to prices from local banks compiled by Bloomberg.

Sweden’s krona weakened versus most of its major peers after unemployment in the nation increased to 8.7 percent in April from 8.6 percent in March. Economists in a Bloomberg survey predicted a drop to 8.5 percent.

The krona weakened 0.5 percent to 9.0379 per euro and depreciated 0.3 percent to 6.5822 per dollar after touching 6.6049, the least since April 22.

 

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