The yen rose to a three-month high against the euro after the Swiss National Bank roiled markets with its decision to abandon the franc's cap, knocking down what an official earlier this week reaffirmed as a pillar of policy.
The yen headed for its biggest weekly gain since the euro's 1999 debut after the single currency tumbled as much as 1.9 percent against the dollar yesterday. The franc surged as much as 38 percent versus the greenback yesterday and gained against all of the more than 150 currencies tracked by Bloomberg. A gauge of global currency volatility jumped to the highest in more than a year. The SNB's decision to make interest rates even more negative boosted demand for higher-yielding U.S. debt.
"The Swiss decision has pushed U.S. yields lower and that's pushing dollar-yen down," said Naohiro Nomoto, an associate for currency trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. "Many central banks are doing their own thing and that's feeding uncertainties and will probably lead to risk aversion in markets such as stocks."
The yen gained 0.2 percent to 134.90 per euro at 11:34 a.m. in Tokyo after appreciating to 134.71, the strongest since Oct. 16. Japan's currency rose 0.2 percent to 115.95 per dollar after reaching a one-month high of 115.90. The euro was little changed at $ 1.1637.
The franc dropped 2.5 percent to 1.0004 per euro after surging as much as 41 percent yesterday to the strongest since the euro's debut. Switzerland's currency fell 2.6 percent to 86.12 centimes per dollar.
Dollar Opportunity
"This passive intervention in euro-Swiss was costly and not effective because for every euro the SNB was taking away, the European Central Bank stood ready to print another three," Hans Redeker, London-based head of global currency strategy at Morgan Stanley, said in a conference call. What the "Swiss franc move did provide us, we think, is an opportunity of very cheap U.S. dollars, to buy the dollar cheap," he said.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was little changed at 1,135.14 after dropping 0.3 percent yesterday.
The SNB decision roiled markets around the world. Japan's benchmark 10-year yield dropped to a record 0.225 percent, after similar-dated U.S. Treasury yields tumbled 14 basis points points yesterday to 1.71 percent. The yield on German two-year notes dropped to a record minus 0.154 percent.
JPMorgan Chase & Co.'s index of global currency volatility rose to 11.51 percent, the highest since June 2013, up from last year's low of 5.28 percent.
Volatility 'Spike'
"With the SNB's policy shift, the euro slid and the franc surged, creating a spike in volatility and that's led to a risk-off trade," said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo. "Yen's being bought amid this risk-off mood."
ECB policy makers meet on Jan. 22 to discuss introducing new stimulus, including quantitative easing, that may add to pressure on the franc against the euro.
The euro has declined 6.1 percent in the past month, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen gained 2.4 percent and the dollar gained 1.8 percent.
Losers Rally
Some of the biggest losers against the greenback over the past six months rallied, as the SNB's surprise spurred investors to close some positions.
New Zealand's dollar gained 0.2 percent to 78.41 U.S. cents after rising 1.4 percent yesterday. The Australian currency climbed 0.2 percent, extending a 0.8 percent rally from Thursday. During the past six months, the kiwi dropped 10 percent and the Aussie slid 12 percent.
Canada's dollar jumped as much as 1.2 percent yesterday before erasing gains. It was little changed at C$ 1.1973 today.
"A lot of investors got burned so now they're closing some positions that they were having some profits — we're seeing that in Canada, in Aussie, in kiwi," said Charles St-Arnaud, London-based senior economist at Nomura Securities International Inc. "Most investors are taking a step back to reassess their willingness to take risks now. That's why you see very little liquidity in the market."
To contact the reporters on this story: Andrea Wong in New York at awong268@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net
To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Naoto Hosoda, Nicholas Reynolds
Press spacebar to pause and continue. Press esc to stop.
No comments:
Post a Comment