Yen retreats—why?

The yen dropped from a three-week high as tensions eased in Ukraine and the U.S. showed signs of pushing back militants in Iraq, reducing haven demand.

The euro (CME:E6U14) fell toward the lowest versus the dollar (NYBOT:DXU14) since November as data showed investors were the most bearish on the currency in two years. The Bloomberg Dollar Spot Index fluctuated before a report this week that may show retail sales grew for a sixth month. Indonesia’s rupiah led emerging-market currencies higher on bets judges will dismiss an election challenge. Norway’s krone (CME:NRU14) advanced along with global stocks.

In dollar-yen, there’s “some relief rally after the U.S. airstrike-news selloff,” said Masafumi Takada, a New York-based director at BNP Paribas SA.“Still nervous on geopolitical risk but holding well as long as the stock market is stabilizing.”

The yen (CME:J6U14) weakened 0.1% to 102.10 per dollar as of 9:20 a.m. New York time, after reaching 101.51 on Aug. 8, the strongest since July 24. The euro depreciated 0.2% to $1.3385 after reaching $1.3333 on Aug. 6, its weakest level since Nov. 8. Japan’s currency strengthened 0.1% to 136.65 versus the euro.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 developed-market peers, was little changed at 1,021.67, after four straight weeks of gains.

A Bloomberg gauge with equal weightings of the dollar’s 20 major emerging-market peers climbed 0.2% to 91.2798, a second day of gains.
 

Rupiah, Krone
 

Indonesia’s currency rose after a court last week questioned evidence provided by losing presidential candidate Prabowo Subianto, who says Joko Widodo’s victory is invalid because it was obtained “unlawfully” or through “abuse of authority” by the election commission.

The rupiah advanced 0.8% to 11,685 per dollar, the biggest gain since July 23, prices from local banks show.

Norway’s krone strengthened versus all of its 31 major peers as a report showed consumer prices increased in the 12 months through July more than economists forecast. The krone gained for a fourth day versus the U.S. currency, appreciating 0.8% to 6.1838 per dollar.

China’s yuan (CME:QTU14) advanced for a sixth day after the central bank strengthened the currency’s daily fixing following data that showed the nation’s trade surplus jumped to a record.

The currency climbed 0.05% to close at 6.1536 per dollar in Shanghai, China Foreign Exchange Trade System prices show. It touched 6.1520, the strongest level since March 17. The spot rate has gained 0.43% in six days and is trading close to par with the reference rate.
 

Net Shorts
 

Futures traders’ bets that the euro will decline against the dollar rose to the most since August 2012, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on depreciation in the euro compared with those on a rise -- net shorts -- was 128,747 in the week through Aug. 5, compared with 108,075 a week earlier.

Interfax reported that Russia’s Defense Ministry said last week that warplanes ended drills in the region near Ukraine. RIA Novosti said Russia is ready to mediate between Ukraine and the rebels, citing Russian Security Council head Nikolai Patrushev.

The conflict continued today, with Ukraine telling residents of separatist strongholds in its easternmost regions to flee as government troops close in after dismissing a cease- fire offered by the militants.

In Iraq, U.S. strikes have slowed Islamic State advances in the north, though the group still holds vast swaths of territory in Syria and Iraq as political haggling is hurting government attempts to offer a coordinated response.

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