Tuesday, February 15, 2011

Yen Weakens After Chinese Consumer-Prices Report Reduces Demand for Safety


By Monami Yui and Ron Harui - Feb 15, 2011 3:07 PM GMT+0800

Euro Advances Speculation European Economic Growth

The euro climbed to $1.3510 as of 11:10 a.m. in Tokyo from $1.3489 in New York yesterday, when it fell to $1.3428, the lowest level since Jan. 20. Photographer: Chris Ratcliffe/Bloomberg
Feb. 11 (Bloomberg) -- Derek Holt, vice president of economics at Scotia Capital, and Wim Boonstra, executive vice president and chief economist at Rabobank, talk about the outlook for European Central Bank and Bank of England monetary policy. They speaks with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)
The yen weakened against most of its major counterparts after a Chinese report showed inflation quickened less than economists estimated, damping demand for safer assets.
The euro rose for the first time in three days versus the yen before European reports today forecast to show the region’s economic-growth quickened and German investor confidence increased. Australia’s dollar was near the strongest this year against New Zealand’s currency after Reserve Bank of Australiaminutes showed policy makers considered a “restrictive” policy stance was appropriate.
“The lower-than-expected consumer-price index will ease market concerns about further and aggressive tightening from the central bank,” said Yuki Sakasai, a currency strategist at Barclays Bank Plc in Tokyo. “That will be negative for the yen and will support risk appetite.”
The yen dropped to 112.61 per euro as of 7:04 a.m. in Londonfrom 112.40 in New York yesterday, after falling to 113.44 on Feb. 11, the weakest since Jan. 28. Japan’s currency declined to 83.53 per dollar from 83.32. The euro traded at $1.3476 from $1.3489.
China’s consumer prices rose 4.9 percent in January from a year earlier, the statistics bureau said. That compared with a 4.6 percent gain in December and the median forecast of 5.4 percent in a Bloomberg News survey of economists.

European Reports

The euro strengthened earlier before economic reports are released today for the eurozone and for countries including Germany, Italy and Spain.
Gross domestic product in the euro region rose 0.4 percent in the fourth quarter, after a 0.3 percent gain in the prior period, according to a Bloomberg News survey. The ZEW Center for European Economic Research in Mannheim will say today its index of German investor and analyst expectations climbed to 20 in February from 15.4 in January, a separate survey showed.
“Today’s European data are expected to confirm the region’s economy is improving,” said Mie Kanai, a researcher at FXOnline Japan Co., a margin-trading company based in Tokyo. “Combined with the lower-than-expected CPI from China, it boosted risk sentiment in the markets and pushed the euro higher.”
European governments agreed yesterday to double the lending capacity of a rescue fund for debt-laden countries in 2013, while seeing no need for immediate steps shield Portugal from the fiscal crisis.

Australian Dollar

The so-called Aussie rose toward a nine-month high versus the yen after the Reserve Bank of Australia said in minutes of its Feb. 1 meeting that a “slightly restrictive” policy stance was appropriate as a resources boom boosts incomes.
The China “outcome is slightly bullish for the commodity currencies as it’s likely to, on the margin, support the view that some of the fears on the pick-up in Chinese and Asian inflation are perhaps overplayed,” said Todd Elmer, the Singapore-based head of Group-of-10 currency strategy for Asia ex-Japan at Citigroup Inc. “The Aussie is a buy on dips.”
Australia’s dollar advanced to 83.63 yen from 83.57 yen after earlier touching 83.90 yen, the strongest since May 13. The Aussie traded at NZ$1.3245 from NZ$1.3252 yesterday, when it rose to NZ$1.3284, the highest since Dec. 29.
Thailand’s baht rose for a second day as stocks gained and on speculation the central bank will tolerate a stronger currency to counter inflation.
A government report Feb. 1 showed consumer prices rose 3.03 percent in January from a year earlier, the most in five months.
“The central bank allowed the baht to appreciate last year to control inflationary pressures,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “People are watching how much more the central bank wants to tolerate” gains in the currency, she said.
The baht gained 0.2 percent to 30.71 per dollar. The currency rose to 30.63 on Feb. 10, the strongest since Jan. 24.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Ronnie Harui in Singapore at rharui@bloomberg.net.
To contact the editor responsible for this story: Nicholas Reynolds atnreynolds2@bloomberg.net.

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