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Yen Rises Versus Most Majors on Iraq Conflict; Zloty Declines

The yen rose versus most of its major peers as violence in Iraq spurred concerns oil supplies will be disrupted and bolstered the appeal of haven assets.

Japan’s currency touched the strongest level in four months against the euro after Iraq’s military attacked insurgents who had captured territory north of Baghdad. Poland’s zloty weakened after leaked recordings cast doubts that the central bank governor can stay in his job. The pound rose as the Bank of England’s deputy governor said an interest-rate increase will show the economy is returning to normal, and the yuan fell the most in almost three months as the central bank cut the reference rate.

“We’re paying a lot of attention to the geopolitical tension,” Vassili Serebriakov, a New York-based foreign-exchange strategist at BNP Paribas SA, said by phone. “The yen is benefiting.”

The yen rose 0.2 percent to 101.86 per dollar at 3:11 p.m. It was little changed against the euro at 138.20, after reaching 137.71, the strongest level since Feb. 6. The euro climbed 0.2 percent to $1.3567 after declining 0.8 percent last week.

Zloty Weakness

The zloty fell for a third day against the euro, weakening 0.6 percent to 4.1437, after recordings of a conversation between the central bank’s governor and a minister cast doubts about Marek Belka’s future and triggered a government crisis.

In a secretly taped 2013 conversation with Interior Minister Bartlomiej Sienkiewicz, published by the Wprost magazine two days ago, the two men are heard speaking about possible central bank moves to bolster growth. Belka said he never broke the law and the recording was “manipulated” to suggest “an instance of the central bank governor exceeding his powers, which never took place,” according to his statement e-mailed by the central bank’s press office yesterday.

China’s yuan declined 0.2 percent to 6.2250 versus the dollar after the central bank cut its daily fixing 0.06 percent to 6.1537 per dollar, the weakest since June 6, following a 0.11 percent gain in the Bloomberg Dollar Spot Index on June 13.

The central bank raised the reference rate by the most in 2014 last week after the country posted its largest monthly trade excess in five years. An official report today showed yuan positions at Chinese financial institutions accumulated from foreign-exchange purchases rose by the least since August.

‘Symbolic Step’

The first U.K. interest-rate increase from the record low “will be a symbolic step, because it will be an indication that we are on the road back to normality,” BOE Deputy Governor Charlie Bean said in a Sunday Times interview.

The pound appreciated as much as 0.3 percent to 79.59 pence, the strongest level since October 2012. Sterling climbed as much as 0.4 percent to $1.7011, the highest since Aug. 6, 2009.

Sterling has rallied 9.2 percent in the past year, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar and the euro have gained 0.1 percent and 2 percent respectively, while the yen has declined 8.4 percent.

“The yen is strengthening due to the geopolitical tensions that are pushing prices of some commodities higher and stocks lower,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. The Japanese currency “has a safe-haven element to it and generally performs well when the market perceives that there is a risk-off scenario,” he said.

Oil Rally

West Texas Intermediate oil futures climbed as much as 63 cents to $107.54 a barrel in electronic trading on the New York Mercantile Exchange and last traded at $106.98. The contract rose on June 13 to the highest closing level since Sept. 18.

“It’s a continuation of the risk-off mood in the global market -- yen is a bit higher and the dollar is higher against riskier rivals,” Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage, said in a telephone interview. “The geopolitical story is taking the center stage.”

Iraq’s army killed more than 279 “terrorists” from the Islamic State in Iraq and the Levant and destroyed 50 of the group’s vehicles within 24 hours, military spokesman Qassim Ata said in a televised news conference yesterday.

The euro reversed losses against the dollar after Bloomberg News reported the ECB President Mario Draghi is likely to refrain from any new stimulus package in coming months as it reviews lenders’ balance sheets, according to two euro-area central-bank officials familiar with current policy discussions.

Euro Support

“It helps the euro a bit -- I don’t think there’s anything particularly new, the details of the story says if inflation surprises to the downside, the ECB could change their view,” BNP’s Serebriakov said. “The perception is Draghi has signaled easing is done as far as policy rates are concerned.”

Policy makers cut the deposit rate to minus 0.1 percent when they met on June 5, lowered the main refinancing rate to a record 0.15 percent and announced measures including targeted longer-term loans.

The annualized euro-area inflation rate, calculated using a harmonized European-Union method, fell to 0.5 percent last month from 0.7 percent in April, matching the lowest reading since November 2009 and confirming the initial June 3 estimate.
Updated 16 Jun 2014 | Soruce: Bloomberg |
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