The yen advanced for a second week versus the euro and the US dollar after the Bank of Japan (BOJ) refrained from further moves to stimulate growth and Spanish bond yields climbed, reviving concern Europe’s debt crisis will spread.
The shared currency fell as investors wagered the European Central Bank (ECB) would not restart its government-bond purchase program. The US dollar rose versus 10 of its 16 most-traded peers as investors sought haven, pushing US Treasury 10-year yields below 2 percent. The Australian and New Zealand dollars gained on stronger domestic data and speculation China will take steps to boost its economy.
“The Bank of Japan became a bit more neutral and that shift gave support to the Japanese yen because it reduced expectations for easing,” said Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York, on Friday. “One of the major supports of the yen is low US yields. With the 10-year below 2 percent, that will drive [US] dollar-yen lower.”
The Japanese currency rallied 1 percent to ￥105.83 versus the euro on Friday in New York, from ￥106.86 the week before. It touched ￥105.45 on Wednesday, the strongest level since February. The yen gained 0.9 percent to ￥80.93 per US dollar, after touching ￥80.57 on Wednesday, the strongest in six weeks. The dollar appreciated 0.1 percent to US$1.3078 per euro.
The Australian currency climbed against all of its major counterparts except the Singapore dollar and the yen, as China recorded an unexpected trade surplus and the slowest economic expansion in almost three years. The data fueled speculation the People’s Bank of China will move to stimulate economic growth. The nation is Australia’s biggest trading partner.
Australia’s dollar also strengthened as payrolls in the nation added 44,000 jobs last month.
The Aussie rose 0.6 percent to US$1.0370 and reached US$1.0453, the highest since April 3. It declined 0.2 percent to ￥83.94.
New Zealand’s dollar rallied versus its US counterpart after the South Pacific nation’s business confidence rose in the first quarter. The currency, nicknamed the kiwi, was 0.4 percent stronger at US$0.8228. It fell 0.5 percent to ￥66.59.
Implied volatility on three-month options on G7 nations’ currencies fell on Friday to the lowest level since August 2008, 9.7 percent, according to a JPMorgan Chase & Co index. The average over the past decade is 10.6 percent.
Lower volatility makes investments in currencies of nations with higher benchmark rates more attractive because the risk in such trades is that market moves will erase profits.