The yen strengthened for the first time in four days against the dollar as Asian stocks fell and traders pushed back estimates for when the Federal Reserve will increase interest rates.
Japan’s currency rose versus all of its 16 major counterparts as demand for haven assets was boosted as the Nikkei 225 Stock Average (NKY) slid 2 percent. The Australian and New Zealand dollars strengthened after China’s factory output and economic growth expanded more than analysts forecast. South Korea’s won climbed to the strongest level this month.
“The weakness in dollar-yen is correlating very closely with the decline in the Nikkei,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney. “A lot of it gets back to the market still being lopsided, the speculative market having been long dollar-yen in an environment where the risks on U.S. data surprises are tilted to the downside,” he said, referring to a bet an asset will rise.
The yen appreciated 0.5 percent to 106.40 per dollar as of 8:13 a.m. London time after weakening 1 percent during the previous three days. Japan’s currency gained 0.3 percent to 136.48 per euro. The dollar depreciated 0.2 percent to $1.2826 per euro.
The yen has advanced 3.7 percent in the past month, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes as signs global growth is cooling underpinned demand for safer assets. The dollar gained 1 percent and the euro rose 0.9 percent.
Futures traders trimmed bets the Fed will raise interest rates by October 2015 to a 46 percent chance yesterday, from 51 percent at the end of last week. The central bank has kept its benchmark in a range of zero to 0.25 percent since December 2008.
The Bloomberg Dollar Spot Index, which measures the U.S. currency against a basket of 10 counterparts, fell for a second day today, dropping 0.2 percent to 1,059.55.
The Aussie and kiwi rallied as reports from China allayed some concerns growth in the Asian nation was slowing. China is Australia’s largest trading partner.
China’s gross domestic product grew 7.3 percent in the third quarter from a year earlier, outpacing the 7.2 percent median estimate of economists surveyed by Bloomberg News. Industrial production rose 8 percent in September from a year ago, compared with a 7.5 percent expansion predicted in a separate Bloomberg survey.
“If we’d have got a really weak China data number today, especially on the industrial production numbers, it would have added more misery and we probably would have seen the markets snap back a little bit,” said Chris Weston, chief market strategist in Melbourne at IG Australia, a unit of IG Group Holdings Plc. “It’s certainly a relief,” and has supported the Aussie dollar, he said.
Australia’s currency rose 0.2 percent to 88.03 U.S. cents and New Zealand’s gained 0.3 percent to 79.94 cents.
The won strengthened against all except one of its 16 major peers as waning bets for Fed interest-rate increases sapped demand for the U.S. currency.
“Factors that led to dollar strength seem to be losing momentum, with expectations getting bigger for a more dovish Fed,” said Jahng Won, a currency trader based in Seoul at Shinhan Bank.
The won gained 0.5 percent to close at 1,054.76 per dollar in Seoul after appreciating to 1,053.05, the strongest since Sept. 30.