The yen rose at least 0.4 percent against all of its 16 major counterparts amid speculation thatGreece may have to restructure its debt again and as global stocks held yesterday’s slump, boosting demand for haven assets.
Japan’s currency extended a second day of gains versus the dollar amid speculation the country’s companies will repatriate overseas earnings before the end of the fiscal year on March 31. The euro climbed toward a one-month high versus the dollar after a draft statement from European finance ministers showed governments are preparing to increase rescue funds when they meet tomorrow.
The yen strengthened 0.6 percent to 82.40 per dollar at 9:27 a.m. London time, trimming its decline this quarter to 7.1 percent. Japan’s currency appreciated 0.5 percent to 109.89 per euro, after increasing as much as 0.8 percent yesterday. The euro was 0.1 percent stronger at $1.3335. The 17-nation currency touched $1.3386 on March 27, the strongest since Feb. 29.“We are starting to see a pickup in safe-haven demand for the yen again,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “There are a number of risk events on the horizon, including Greece, and there are some signs that the upward momentum in equities, driven by central-bank liquidity, is starting to fade.”
The MSCI World Index of shares was little changed after a 0.8 percent drop yesterday. TheStoxx Europe 600 Index (SXXP) was also little changed.
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There may be “down the road another restructuring of the outstanding debt” in Greece, Moritz Kraemer, head of sovereign ratings at Standard & Poor’s said at an event in London late yesterday. Greece pushed through the biggest sovereign-debt restructuring in history earlier this month, paving the way for an international bailout.
Speculation Japanese companies are repatriating overseas earnings before fiscal year-end book-closing also boosted the yen.
That demand “is capping gains in dollar-yen,” said Kazuo Shirai, a trader at Union Bank NA inLos Angeles. “I think the yen will grind weaker” if it stays around the 82 per dollar level.
A draft statement dated March 23 and obtained by Bloomberg News showed that European governments are preparing for a one- year increase in the ceiling on rescue aid for indebted nations to 940 billion euros to keep the region’s crisis at bay. German Chancellor Angela Merkelsaid on March 26 her country may back plans for the European Financial Stability Facility and the European Stability Mechanism to run in parallel.
Support for Euro
“We do believe the approval for the rescue package will go ahead tomorrow, and this may create more support for the euro in the interim,” Emma Lawson, a Sydney-based currency strategist at National Australia Bank Ltd. (NAB), wrote in a research note today.
The euro has risen 0.6 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The dollar has weakened 2.6 percent, while the yen has fallen 9.8 percent, set for its biggest drop since the third quarter of 1995, the indexes show.
The New Zealand dollar has strengthened the most in 2012, with a 3.2 percent gain.
China’s yuan fell, snapping a two-day rally against the greenback, on signs growth in the world’s second-biggest economy is slowing. The country is scheduled to release a purchasing managers index for manufacturing on April 1, with economists surveyed by Bloomberg predicting a reading of 50.6 for March, compared with 51 in February.
A flash reading for March of a separate private gauge came in at 48.1 when it was published on March 22, below the 50 level that divides expansion from contraction.
The yuan fell 0.1 percent to 6.3099 per dollar.
Implied volatility of three-month options of Group of Seven currencies was at 10 percent, compared to as low as 9.85 percent yesterday, according to the JPMorgan G7 Volatility Index (JPMVXYG7). A increase makes investments in currencies with higher benchmark lending rates less attractive as the risk in such trades is that market moves will erase profits.
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