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Yen Advances for Second Day as Machinery Orders Stagnate - (Bloomberg)

Posted by Chris Advincula on Sep 12, 2013 7:39:00 AM

The yen strengthened for a second day against the dollar after Japan’s machinery orders stagnated in July and amid concern a sales-tax increase will hamper economic growth, boosting demand for the currency as a haven.

The euro dropped for the first time in five days versus the dollar as a report showed industrial output in the 17-nation region contracted in July. Australia’s currency weakened against all its major counterparts after a government report showed employers unexpectedly cut payrolls for a second month. The New Zealand dollar advanced as the central bank signaled it may raise interest rates from a record low.

“The impetus for a new period of yen weakness isn’t quite there yet,” said Simon Smith, chief economist at FxPro Group Ltd. in London. “We’re seeing some yen strength. The Aussie is the other interesting thing after the jobs data.”

Japan’s currency rose 0.5 percent to 99.37 per dollar at 7:04 a.m. in New York after depreciating to 100.61 yesterday, the weakest level since July 22. The yen advanced 0.6 percent to 132.12 per euro after strengthening 0.2 percent yesterday. The euro fell 0.1 percent to $1.3294.

Prime Minister Shinzo Abe will announce Japan will raise the sales tax to 8 percent from 5 percent in April as planned, the Yomiuri newspaper reported without saying where it got the information. Abe will detail a 5 trillion-yen stimulus package along with the tax increase, the paper said.

Machine Orders

Japanese machinery orders were unchanged in July from the previous month when they fell 2.7 percent, the Cabinet Office said in Tokyo. Economists surveyed by Bloomberg News predicted an increase of 2.4 percent.

“Investor confidence in Abenomics has been dampened modestly by the release of the weaker-than-expected machinery orders,” Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a note to clients referring to the Prime Minister’s economic policies. The yen has strengthened back through “the psychologically important 100 level,” he said.

The yen has slumped 11 percent this year, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 3.9 percent and the euro advanced 4.8 percent.

The euro dropped for a second day versus the yen after the European Union’s statistics office said factory production in the 17-nation region declined 1.5 percent from June, when it gained 0.6 percent.

Economists in a Bloomberg News survey predict euro-area growth will slow to 0.1 percent in the third quarter after a 0.3 percent expansion in the three months through June.

Aussie Slides

Australia’s dollar fell the most in three weeks as the statistics bureau said the number of people employed dropped 10,800 last month, following a decline of 11,400 in July.

“You can see this as a genuinely soft employment report,” said Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney. “The fallback in the Aussie is justified.”

The Aussie weakened 0.9 percent to 92.48 U.S. cents, the biggest decline since Aug. 21.

The kiwi strengthened for a fifth day versus the U.S. currency after the Reserve Bank of New Zealand said interest-rate increases “will likely be required next year” as the economy strengthens and inflation picks up.

“The RBNZ’s Monetary Policy Statement this morning was more hawkish than we had expected,” Imre Speizer, a market strategist at Westpac Banking Corp. (WBC) in Auckland, wrote in a note to clients. “The initial market reactions should persist throughout the day.”

The kiwi jumped 0.8 percent to 81.43 U.S. cents after rising to 81.56 cents, the strongest level since Aug. 19. 

Won Advances

South Korean’s won climbed to the strongest level in more than six months as the central bank kept its policy rate at the lowest since 2010 to support economic growth.

The Bank of Korea held its seven-day repurchase rate at 2.5 percent, following a quarter percentage-point cut in May. The won also rallied after Chinese Premier Li Keqiang said Asia’s largest economy can achieve its main economic targets this year. China is South Korea’s biggest export market.

“The central bank will keep a dovish tone for now because it may not have much leeway to cut interest rates,” said Suresh Kumar Ramanathan, a regional currency strategist at CIMB Investment Bank in Kuala Lumpur.

The won climbed 0.2 percent to close at 1,084.91 per dollar in Seoul after reaching 1,081.90, the strongest since Feb. 28. 


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