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Yen Advances as US Budget Talks Spur Haven Appeal; Krona Falls - (Bloomberg)

Posted by Chris Advincula on Sep 25, 2013 5:27:00 AM

The yen held gains versus most of its major peers as stocks in Asia and the U.S. dropped amid concern that budget talks in Washington risk a federal government shutdown, sparking demand for haven currencies.

The greenback was little changed before data forecast to show new-home sales rebounded in August. New Zealand’s dollar fell after the nation’s trade deficit unexpectedly widened. The Swedish krona reversed gains versus the euro and dollar as a gauge of consumer confidence missed analyst estimates.

“While it’s likely that the U.S. will reach a budget deal in the end, the uncertainty surrounding it in the meantime has fueled risk aversion,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. “The dollar and the yen tend to be supported in an environment where investors are paring back on risky assets.”

The yen rose 0.2 percent to 98.59 per dollar at 8:44 a.m. London time. The U.S. currency was little changed at $1.3482 per euro from $1.3474 yesterday, when it gained 0.1 percent. The euro weakened 0.1 percent to 132.92 yen.

The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major currencies, was little changed at 1,014.33 after climbing 0.2 percent yesterday.

The U.S. Senate is set to hold a test vote today on legislation passed by the House of Representatives to cover federal spending through Dec. 15, and choke off funds for President Barack Obama’s health-care law. The debate may extend past a Sept. 30 deadline. The next fiscal year begins Oct. 1.

Housing Market

The MSCI Asia Pacific Index of stocks fell 0.2 percent, adding to a 0.6 percent decline yesterday. The Standard & Poor’s 500 Index weakened 0.3 percent yesterday in a fourth day of losses.

Purchases of new houses in the U.S. climbed 6.6 percent to a 420,000 annual rate in August after plunging in July by the most in three years, according to economists in a Bloomberg News survey before the Commerce Department data today. Even with the gain, the purchase pace would fall short of the average 448,000 rate in the first six months of the year.

Excluding the volatile transportation category, orders for durable goods in the U.S. rose 1 percent in August after falling 0.8 percent the prior month, according to a separate survey before today’s report.

The dollar has fallen 1.8 percent in the past month, the biggest decline among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro lost 1 percent. This year, the greenback is up 2.9 percent, the euro has gained 5.4 percent and the yen is down 11 percent.

Euro Confidence

The derivatives market is showing the most confidence in the euro area since before the financial crisis as the premium traders pay to exchange euro-denominated loans for dollar funding for one-year has fallen to the lowest since March 2008.

The one-year cross-currency basis swap between euros and dollars shrank to minus seven basis points today, from minus 24 at the end of last year, data compiled by Bloomberg show.

A negative swap rate signals that investors are willing to receive reduced euro interest payments to obtain dollar funding, and a smaller spread signals more confidence in the currency.

Bundesbank President and European Central Bank governing council member Jens Weidmann is scheduled to speak today.

The New Zealand dollar fell versus all 16 of its major peers after official data showed the nation’s trade deficit widened to NZ$1.2 billion ($989 million) in August, the biggest shortfall in five years. The kiwi declined 0.6 percent to 82.34 U.S. cents and 0.7 percent to 81.21 yen.

Swedish Krona

Sweden’s krona weakened for a fourth day against the dollar, the longest losing streak since June, as a gauge of consumer confidence fell to 98 in September from 98.8 a month earlier. The median forecast of eight economists was 100.2.

The nation sold its remaining 7 percent stake in Nordea Bank AB (NDA), the Nordic region’s largest lender, for 21.6 billion kronor ($3.37 billion). The state sold 284 million shares to institutional domestic and international investors, it said today, as part of a broader plan to reduce debt.

The krona dropped 0.1 percent to 6.4062 per dollar and 0.2 percent to 8.6384 per euro. 


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