Sun, Feb 21, 2016 - Page 15 News List

Yen climbs on haven bid

Bloomberg and staff writer, with CNA

The yen rose, posting its longest run of weekly gains since September last year, as investors look past signs of improvement in the US economy and instead channeled their cash into haven assets.

Japan’s currency strengthened against all its 16 major peers even after a US report showed inflation rose the most in more than four years last month.

The yen has been the chief beneficiary of weeks of turmoil stemming from concern that global growth is slowing, and policymakers, investors and strategists are weighing whether this strength can last. Goldman Sachs Group Inc reiterated its forecast for the currency to trade more than 15 percent weaker by the end of the year, even as options contracts show investors are paying up to protect against yen gains.

“When you have a risk-off market, safe haven flows go to the highest-liquidity currency with a current account surplus, and that’s Japan,” said Jennifer Vail, head of fixed-income research at US Bank Wealth Management, which oversees US$125 billion.

Vail said she would not bet on the US dollar strengthening against the yen.

Japan’s currency advanced 0.5 percent to ¥112.63 per US dollar at 5pm in New York on Friday. The yen rose 0.4 percent to ¥125.31 against the euro, after earlier reaching ¥125.02, the strongest level since June 2013.

The yen has gained for a third week, the longest streak since the five days ended Sept. 4. That move has come even after Bank of Japan Governor Haruhiko Kuroda unexpectedly adopted negative interest rates at the end of last month, sparking speculation the central bank might intervene to arrest the currency’s gains.

Japanese authorities will find it “very difficult” to step in should the yen’s appreciation accelerate before G20 finance ministers and central bankers meet next weekend in Shanghai, said Mansoor Mohi-uddin, senior markets strategist in Singapore at Royal Bank of Scotland Group PLC.

The premium for options protecting against gains by the yen, compared with those insuring against a loss, rose to near the highest since 2010, three-month risk reversals show. However, the US dollar-yen’s 14-day relative strength indicator was close to 30, a level that some traders view as a signal the currency has reached extreme levels and may reverse.

Forecasters are also unconvinced that yen strength will be sustained. Goldman Sachs sees the yen weakening to ¥120 per US dollar “in the near term,” and ¥130 by year-end, Goldman analysts led by chief currency strategist Robin Brooks wrote in a note to clients on Friday.

The median of more than 50 estimates compiled by Bloomberg calls for the yen to slump to ¥120 per US dollar by the end of next month, and to ¥123 by year-end.

In Taipei, the US dollar rose against the New Taiwan dollar on Friday, gaining NT$0.036 to close at the day’s high of NT$33.561, in part due to central-bank intervention, dealers said.

The greenback closed higher for the fourth session in a row, buoyed by the central bank’s intention to keep the NT dollar cheaper at a time when foreign investors continued to move funds into the country, they said.

For the week, the US dollar rose 0.12 percent against the NT dollar.

The central bank made its presence felt after seeing the US dollar fall below the NT$33.3 mark, and it intervened more aggressively late in the trading session as the South Korean won dipped to a five-year low because of worries over the nation’s economy, dealers said.

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