Yen Rises Against Peers on Refuge Demand Amid U. S. , Europe Debt Crises

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From International Desk - International Currency News

The yen gained against all of its 16 major counterparts as concern that the U. S. and Europe will struggle to contain their debt spurred demand for Japan s currency as a refuge.

The euro fell against the yen after Standard & Poor s said Greece will partially default on its debt once European officials push through a second bailout for the nation. The dollar was 0. 3 percent from a record low against the Swiss franc as U. S. lawmakers remained at odds on how to raise the country s debt limit and before a report today that may show pending home sales dropped in June.

The market is being swayed between the U. S. issue and Europe s crisis, and people have no choice but to buy the franc and yen, said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd. , which provides foreign-exchange margin-trading services. We don t see new factors that ease concern about the two issues.

Japan s currency rose to 111. 67 per euro as of 12:29 p. m. in Tokyo from 112. 04 in New York yesterday, when it climbed 0. 9 percent. The yen gained to 77. 80 per dollar from 77. 98. Yesterday it advanced to 77. 57 against the greenback, the strongest since it hit a postwar record on March 17.

The 17-nation euro was at $1. 4335 from $1. 4369 yesterday, when it reached $1. 4536, the strongest level since July 5. The dollar traded at 80. 19 Swiss centimes from 80. 17, after touching a record low 79. 96 yesterday. The euro fetched 1. 15122 Swiss francs, compared with the all-time low of 1. 13737 reached July 18.

Debt Ceiling

The shared currency weakened for a second day against the yen after S&P lowered Greece to CC. The nation will partially default once European officials push through a plan that will see bondholders pay for part of a second bailout agreed to last week, the ratings company said.

U. S. House Speaker John Boehner revised his plan to raise the $14. 3 trillion debt ceiling and cut spending as he gained support among fellow Republicans for a proposal which Senate Democrats said will not pass their chamber. President Barack Obama has threatened to veto the measure as Republican leaders moved ahead with plans to vote on it.

The Congressional Budget Office said Boehner s new plan would cut $915 billion in spending over a decade, still short of the $2. 2-trillion Senate proposal. Treasury Secretary Timothy F. Geithner has said the U. S. will run out of options to prevent a default on Aug. 2.

Risk of Downgrade

There s a risk U. S. debt will be downgraded when you look at spending-cut plans presented by Democrats and Republicans, said Hitoshi Asaoka, senior strategist in Tokyo at Mizuho Trust & Banking Co. , a unit of Japan s third-largest bank by market value. The dollar is in a downtrend for now, while the franc and yen are being bought.

U. S. pending home sales fell 2 percent in June after rising 8. 2 percent in May, according to the median estimate of economists in a Bloomberg News survey before today s data.

IntercontinentalExchange Inc. s Dollar Index, which tracks the greenback against currencies including the euro, yen and pound, was at 74. 106 from 74. 093 yesterday, when it touched 73. 421, the lowest level since May 5.

The yen extended gains after Jiji Press reported Japan Economy Minister Kaoru Yosano suggests he will wait for the outcome of the U. S. federal debt ceiling issue, citing Aichi prefecture s governor.

Intervention Bets

Comments like that reassure the market there will be no intervention, said Minori Uchida, senior analyst at Bank of Tokyo-Mitsubishi UFJ Ltd. , a unit of Japan s biggest bank. I think some people were cautious about intervention because the yen is higher than it was when Japan conducted solo intervention.

Bank of Japan board member Hidetoshi Kamezaki said yesterday he s watching the yen s recent gains with great caution as the currency s strength could damage the economy. The BOJ will take needed policy action proactively, he said. Japanese Finance Minister Yoshihiko Noda said today he will continue to monitor financial markets closely.

Volatility implied by one-month dollar-yen options was 10. 09 today after reaching a two-month high of 10. 59 on July 14.

Group of Seven nations jointly sold the yen on March 18 after it rose to a postwar record of 76. 25 to the dollar the previous day, saying in a statement they wanted to reduce excess volatility and disorderly movements.

Courtesy: Bloom Berg

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