Yen Gains With Dollar as Putin Sparks Haven Asset Demand
The yen gained against all of its 16 major peers as Russian President Vladimir Putin’s threat to invade Ukraine intensified one of the most serious standoffs since the Cold War, boosting demand for haven assets.
Japan’s currency touched its strongest level in almost one month versus the greenback after Putin won parliamentary backing to send troops into Russia’s southern neighbor. The euro slid for a fifth day against the Swiss franc, after the Russian ruble and Ukraine’s hryvnia plunged to record lows last week. South Korea’s won dropped to a one-week low after the communist north fired two fired two short-range missiles off its east coast.
“The North Korea news added momentum to the yen buying that began with events in Ukraine,” said Kengo Suzuki, the chief currency strategist at Mizuho Securities Co. in Tokyo. “There’s a risk-off tone building in currency markets.”
The yen climbed 0.4 percent to 101.42 per dollar as of 12:43 p.m. in Tokyo, after earlier reaching 101.26, the strongest level since Feb. 6. It jumped 0.5 percent to 139.73 per euro. The 18-nation currency slid 0.2 percent to $1.3777.
The Swiss franc advanced 0.2 percent to 1.2121 per euro and gained 0.1 percent to 87.97 centimes per dollar. Australia’s dollar was little changed at 89.19 U.S. cents from last week, after earlier touching 88.91, the lowest since Feb. 5. The Aussie has fallen 1.3 percent since Feb. 24.
U.S. Secretary of State John Kerry will travel to Kiev to meet with Ukrainian leaders tomorrow to offer support as Russian troops occupy the nation’s Crimea region, U.S. officials said yesterday. President Barack Obama contacted overseas leaders on how to respond to the incursion, which prompted Ukraine to mobilize its army reserves as it seeks international economic aid. Ukraine said over the weekend an invasion would be “an act of war.”
“It’s going to be a classic flight to quality move,” Ian Lyngen, a bond strategist at CRT Capital Group LLC in Stamford, Connecticut, said in a phone interview. “The market is more focused on the extent to which Russia is willing to press their case and how escalated the conflict becomes. They just want to make sure that if there is some big move that has bigger implications that they’re not caught on the wrong side of it.”
The MSCI Asia Pacific Index of shares dropped 1 percent.
The hryvnia halted a four-day tumble on Feb. 28, gaining 7 percent to 9.95 per dollar after sank to a record closing low of 10.7 the previous day. The ruble weakened 0.6 percent against Bank Rossii’s target basket of dollars and euros last week, closing Feb. 27 at a record-low 42.0712.
“You’re going to get some automatic selling of Russian ruble,” Sebastien Galy, a senior currency strategist at Societe Generale SA in New York, said by phone yesterday. “Aussie dollar, kiwi, Canadian dollar are not going to be very happy places.”
Australia’s dollar held a four-day decline and the nation’s three-year bonds advanced on signs of a slowdown in China, the nation’s largest export market.
China’s purchasing managers’ index of manufacturing released on March 1 dropped to 50.2 in February, the lowest since June. Analysts polled by Bloomberg News projected a reading of 50.1 with levels below 50 signaling shrinking output.
Another PMI (EC11CHPM) reading today from HSBC Holdings Plc and Markit Economics dropped to 48.5 in February from 49.5 the previous month, in line with economists’ estimates.
Three-year yields in Australia fell five basis points to 2.78 percent, after touching 2.76 percent, the lowest since Sept. 30. A basis point is 0.01 percentage point.
South Korea’s won touched a one-week low after the country’s defense ministry said the communist north fired two short-range missiles off its east coast today. The won fell 0.3 percent to 1,070.25 per dollar after touching 1,075.14, the weakest since Feb. 24.
The losses in the euro were limited after data last week showed consumer price gains in the region beat economists’ forecast ahead of the European Central Bank meeting on March 6.
The Feb. 28 figures showed inflation grew an annual 0.8 percent, exceeding the median estimate of 0.7 percent in a Bloomberg survey of economists. It remains at less than half the 2 percent level the ECB uses to define price stability. ECB President Mario Draghi testifies in Brussels today.
“We had a stronger-than-expected CPI print on Friday, which may just be enough to hold the ECB off from talking about further rate cuts,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland. “If the ECB sounds less dovish than it has lately, then the euro should benefit.”