By Kevin Buckland and Masaki Kondo
The yen held its biggest gains in 2 1/2 months against the dollar and euro as traders sought safe-haven investments amid escalating tension in Syria. Japan’s currency reached its strongest level in two weeks against the greenback, and the Swiss franc touched the highest in a week. Turkey’s lira and India’s rupee both dropped to record lows as global stocks slumped.
The pound was near a three-week low against the euro ahead of a speech by Bank of England Governor Mark Carney. “The yen and Swiss franc are being bought as news about Syria reduces risk appetite,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “This risk-off environment is likely to continue until the situation becomes clearer.”
The yen slipped 0.2 percent to 97.20 per dollar as of 10:46 a.m. in Tokyo from yesterday, when it rallied 1.5 percent, the most since June 11. It earlier touched 96.82, the strongest since Aug. 12. Japan’s currency declined 0.1 percent to 130.13 per euro after gaining 1.3 percent yesterday, the most since June 14.
The franc traded at 91.83 centimes per dollar, after touching 91.71, matching the strongest since Aug. 21. The euro slid 0.1 percent to $1.3387, following a 0.2 percent advance yesterday. The pound was little changed at 86.168 pence against Europe’s single currency from yesterday when it reached 86.238, the weakest since Aug. 7. The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major peers, added 0.1 percent to 1,025.95.
President Barack Obama’s administration is working with allies including the U.K. and France to reach agreement on limited action against Syria after concluding that Assad’s regime used chemical weapons against civilians. Any armed response would be narrowly focused on Syria’s weapons capabilities and would not be aimed at deposing Syrian President Bashar al-Assad, U.S. and U.K. officials said.
The MSCI Asia Pacific Index of stocks fell 1.4 percent. In the U.S., the Standard&Poor’s 500 Index dropped 1.6 percent yesterday. Turkey’s lira touched 2.0499 per dollar, a record low according to data compiled by Bloomberg since 1981. India’s rupee reached 66.190 per dollar yesterday, surpassing the previous record low set on Aug. 22.
Pending sales of previously owned U.S. homes probably stagnated in July, according to the median estimate of economists surveyed by Bloomberg News before today’s report. Data on mortgage applications is also due, after the gauge fell to the lowest in more than two years in the week to Aug. 16.
Revised figures from the Commerce Department tomorrow may show U.S. gross domestic product grew at a 2.2 percent annualized rate in the second quarter, a separate survey showed, faster than the initial reading of 1.7 percent. Central bank policy makers are debating whether the U.S. economy is strong enough to allow them to pare back monthly purchases of $85 billion in Treasuries and mortgage debt.
In the U.K., Carney gives his first policy speech since taking over as BOE Governor on July 1. He introduced so-called forward guidance this month to prevent a pickup in borrowing costs from undermining the economic recovery. Investors pushed benchmark gilt yields to a two-year high last week. The central bank’s Monetary Policy Committee meets on Sept. 5, the same day as the European Central Bank.
“Given the arguably disappointing market reaction to the Bank of England’s new forward guidance, we expect the tone to be quite dovish,” Vicky Redwood, an economist at Capital Economics Ltd. in London, wrote in a research note dated today. “He may even go so far as to hint that the MPC will do more to stem the rise in rate expectations.”
ECB Executive Board member Joerg Asmussen said yesterday that monetary policy “will stay expansionary for as long as needed.” “Our interest rates will remain at the present or lower level for a longer period of time,” he said in a speech in Dautphetal-Buchenau, Germany. “Next week is the Governing Council with a potential monetary-policy decision.”