Yen Falls a Seventh Day Before Reports on U.S. Jobs, French Manufacturing


By Masaki Kondo and Ron Harui – Apr 1, 2011 11:16 AM GMT+0800 Fri Apr 01 03:16:50 GMT 2011

The yen weakened against all its major counterparts before reports that economists said will show U.S. employers added jobs and a gauge of French manufacturing held at the highest level in nine months. Photographer: Tomohiro Ohsumi/Bloomberg

The yen weakened against all its major counterparts before reports that economists said will show U.S. employers added jobs last month and a gauge of French manufacturing held at the highest level in nine months.

Japan’s currency dropped to a 10-month low against the euro as signs that global growth is gathering momentum bolstered demand for riskier assets. The Dollar Index rose amid speculation Federal Reserve policy makers will signal today they may withdraw emergency monetary support for the economy.

“Economies outside of Japan look like they’re expanding firmly and there seems to be risk-on sentiment,” said Osao Iizuka, head of foreign-exchange trading in Tokyo at Sumitomo Trust & Banking Co., a unit of Japan’s third-largest banking group. “The yen will probably weaken.”

The yen fell to 118.48 per euro as of 12:12 p.m. in Tokyo from 117.69 in New York yesterday after sliding to 118.51, the lowest since May 13. Japan’s currency declined 0.6 percent to 83.66 per dollar after dropping to 83.70, the weakest since Feb. 17. The euro traded at $1.4160 from $1.4158. The MSCI Asia Pacific excluding Japan Index of shares rose 0.2 percent.

The Japanese currency declined for a seventh day against the dollar, set for the longest losing streak since July 2005. It extended its drop into a second quarter after losing 2.4 percent in the three months through yesterday, the sharpest quarterly drop since the end of 2009.

U.S. employment rose for a sixth month, increasing by 190,000 in March, according to a Bloomberg News survey of economists before the Labor Department report today. An index based on a survey of purchasing managers in the French manufacturing industry rose to 56.6 in March, the highest level since December, according to a separate survey before the report from Markit Economics today.

Fed Outlook

Large Japanese manufacturers forecast on average that the yen will trade at 84.20 per dollar in the year through March 2012, according to today’s report, according to the Bank of Japan’s Tankan survey released today.

Federal Reserve Bank of Richmond President Jeffrey Lacker said yesterday the central bank should review whether to reduce its planned purchase of $600 billion in Treasuries because of improving economic data. New York Fed President William Dudley, Philadelphia Fed President Charles Plosser and Dallas Fed President Richard Fisher are scheduled to speak today.

‘Significant Possibility’

“There’s a significant possibility that the Fed will move closer to exiting from quantitative easing,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “U.S. data have been getting better. The dollar is likely to strengthen.”

The Dollar Index increased for the first time in three days, adding 0.1 percent to 76.093.

Interest-rate futures on the Chicago Board of Trade showed a 48 percent chance the Fed will raise its benchmark rate by January 2012, up from 47 percent odds a week earlier. The rate has been at a range of zero to 0.25 percent since December 2008.

The euro was set for a third weekly climb against the Japanese currency on speculation the European Central Bank will raise interest rates to contain inflation.

The central bank will increase its main refinancing rate by 25 basis points to 1.25 percent on April 7, a Bloomberg survey of economists shows. ECB President Jean-Claude Trichet signaled on March 3 that he may raise rates this month.

“We are broadly constructive on the euro this year, especially as Trichet has now primed the markets for imminent interest-rate hikes,” Morgan Stanley analysts Tim Davis and Calvin Tse wrote in a research note yesterday. “Rate differentials should increasingly play in the euro’s favor.

The euro has risen 3.4 percent against the yen in the past five days, matching the biggest weekly jump since Jan. 14.

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