April 20 — The yen weakened against higher- yielding currencies including the Australian dollar as optimism the global economic recovery remains on track dented demand for the relative safety of the Japanese currency.
The yen depreciated versus all 16 most-traded currencies as stocks rose after a report showed German investor confidence improved more than forecast this month. Australia’s dollar gained after the central bank said concern a mining boom will fuel inflation spurred policy makers to raise interest rates this month. The Swedish krona climbed against the euro after the nation’s central bank repeated its intention to raise rates as soon as July.
“The market is positioned for the yen to become the big loser in the second quarter,” said John Hydeskov, a currency analyst at Danske Bank A/S in Copenhagen. “The developments in the global economy are still conducive for risk appetite and in that environment, the yen will decline.”
The yen weakened 0.5 percent to 92.83 per U.S. dollar at 7:55 a.m. in New York, from 92.40 yesterday. It depreciated to 125.28 per euro, from 124.64. The euro rose to $1.3494, from $1.3489. The yen will trade at about 95 per dollar in a month, Hydeskov said.
Australia and Canada’s dollars led the gains among the most-traded currencies, rising 1.2 percent to 86.40 yen and 0.7 percent to 91.74 yen, respectively. The MSCI World Index of shares climbed 0.4 percent, with the Stoxx Europe 600 Index advancing 1.2 percent after Goldman Sachs Group Inc. reported first-quarter earnings that beat analysts’ estimates.
Yen Weakness
India’s rupee climbed 1 percent to 2.086 yen after the central bank raised interest rates for the second time in a month, to 5.25 percent, and ordered lenders to set aside more cash as reserves, seeking to slow the highest inflation rate among the Group of 20 nations.
“For now the markets are returning to risk-taking mode, reflected by renewed yen weakness,” Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a note to clients today.
The krona appreciated 0.5 percent to 9.6298 per euro after touching 9.6269, the strongest since Oct. 13, 2008. The Riksbank reiterated a forecast to boost its seven-day repo rate in “summer or early autumn.” It kept the rate at 0.25 percent today, as predicted in a Bloomberg survey of economists.
German investor confidence increased to 53 this month, from 44.5 in March, the ZEW Center for European Economic Research said today in Mannheim, Germany. The gauge beat the 45.1 median estimate in a Bloomberg survey of 36 economists.
Aussie Gains
Australia’s dollar rose for a second day versus the yen as traders added to bets the nation’s central bank will increase borrowing costs at its May meeting.
“The fact that the prospective rise in the terms of trade was now likely to be noticeably stronger than had been expected was a factor suggesting that it might be prudent not to delay” raising interest rates, Reserve Bank of Australia officials said in minutes of their April 6 meeting released today in Sydney.
“Given that we’re not quite at the neutral level yet, the RBA is likely to probably hike again in May if the inflation data in particular surprises to the upside,” said Sue Trinh, a senior currency strategist in Hong Kong at Royal Bank of Canada. The minutes are “being seen as supportive for the Aussie dollar,” she said.
There’s a 33 percent chance Australia’s central bank will raise rates when it meets on May 4, according to a Credit Suisse Group AG index. The odds were 21 percent yesterday.
Canadian Dollar
The Canadian dollar rebounded from near a three-week low against the greenback on speculation Bank of Canada Governor Mark Carney will signal the central bank is moving closer to raising interest rates.
The Bank of Canada will hold its benchmark rate at 0.25 percent today, according to all 25 economists surveyed by Bloomberg News. The central bank’s monetary-policy report, to be released April 22, may show a shift to a “somewhat more hawkish stance,” according to BNP Paribas SA. Carney signaled last month he’s open to raising the target rate as early as June as inflation and growth outpace forecasts.
“Economic data has continued to show that the Canadian economy is performing strongly, while its main export market in the U.S. shows clear signs of a recovery,” analysts led by Hans-Guenter Redeker, London-based global head of foreign- exchange strategy at BNP Paribas, wrote in a research note today. “We continue to target a move toward 98” U.S. cents, they wrote.
Canada’s dollar traded at C$1.0123 per dollar, from C$1.0144 yesterday, when it touched C$1.0216, the lowest since March 30
