The dollar gained against the yen and euro after U.S. jobless-insurance claims unexpectedly rose, fueling appetite for the currency’s safety amid speculation the world’s largest economy may be slow to recover.
The euro weakened versus the dollar, after dropping the most in almost 22 months yesterday, as a report showed European industrial production unexpectedly contracted in June. The dollar traded near its lowest level against the yen since 1995. Stocks dropped.
“Amid an environment of already soft risk appetite, these initial claims numbers are certainly not going to do anything to improve the market’s mood,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. “I see continued pressure on equities, commodities, emerging-market assets and further strength in the dollar.”
The dollar rose 0.5 percent to 85.81 yen at 10:14 a.m. in New York, from 85.32 yesterday, when it depreciated to 84.73, the weakest level since July 1995. The U.S. currency gained as much as 0.6 percent to $1.2781 per euro before trading at $1.2850, from $1.2863, after a rally yesterday of 2.4 percent, the biggest since Oct. 24, 2008. The euro rose 0.5 percent to 110.30 yen, from 109.74.
The Standard & Poor’s 500 Index declined 0.6 percent, and the Stoxx Europe 600 Index lost 0.3 percent.
Initial jobless claims increased by 2,000 to 484,000 in the week ended Aug. 7, the highest level since mid-February, Labor Department figures showed today in Washington. The number of people receiving unemployment benefits dropped, while those getting supplemental benefits surged by 1.34 million, reflecting the government’s extension of eligibility.
European Output
Output in the euro region’s economy dropped 0.1 percent from May, when it increased 1.1 percent, the European Union’s statistics office said today. The median forecast of 32 economists in a Bloomberg News survey was for a gain of 0.6 percent.
The yen has risen 14 percent this year, the most among 10 developed-world currencies, Bloomberg Correlation-Weighted Currency Indices show. Its rally has fueled speculation the government may intervene to curb its appreciation.
Japan’s Finance Minister Yoshihiko Noda said he wasn’t planning a conference call with Group of Seven counterparts to discuss currency moves.
Closely Watching Yen
Noda pledged today in an unscheduled press conference to work with Bank of Japan Governor Masaaki Shirakawa, who said the bank is closely watching “substantial” movements in currency and stock markets. Central banks intervene in the foreign- exchange market when they buy or sell currencies to influence exchange rates.
“There were more comments overnight by the Bank of Japan; they keep talking about how they’re watching the market,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “Choppiness in the market is being attributed to people being on intervention watch — they’re trying to play both sides.”
Japan hasn’t intervened in the currency markets since March 16, 2004, when the yen was around 109 per dollar. The Bank of Japan sold 14.8 trillion yen ($173 billion) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003.
The country’s large manufacturers expect the yen to average 90.16 per dollar in the six months to March 2011, according to the Bank of Japan’s quarterly Tankan survey released July 1. Japanese exports make up about 13 percent of the economy.
Exporters said they can remain profitable as long as the yen trades at 92.90 per dollar or weaker, according to a Cabinet survey released in February. The breakeven point was 97.33 a year earlier.
By Catarina Saraiva and Bo Nielsen
Tags: bank of japan, economists, economy activity, japan's economy, japanese business, unemployment rate
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