News Column

Yen rallies most in five months

January 26, 2014

The yen rallied the most in a week versus the dollar since August as a selloff in emerging-market currencies stoked demand for haven assets. The yen gained against all but two of 174 global peers, and the Swiss franc rose the most since September, as increased scrutiny of credit risks in China boosted refuge demand. Argentina's peso tumbled 15 per cent as the worst global performer after the country devalued the currency. Turkey's lira slid to a record and Russia's ruble fell to a five-year low. Stocks fell and bonds rose. The Federal Reserve is forecast to continue tapering stimulus at a policy meeting next week. "Risk aversion certainly impacts countries with higher deficits and lower reserves," Ken Dickson , an Edinburgh -based director for foreign exchange at Standard Life Investments Ltd. , which oversees $291 billion , said yesterday. "We are seeing all of this over the past 36 hours," The yen rallied 1.9 per cent to 102.31 per dollar this week after reaching 102, the biggest advance since the week ended on August 9 and the strongest level since December 6 . It appreciated 0.9 per cent to 139.98 per euro. The 18-nation common currency rose one per cent to $1.3678 . The franc gained 1.7 per cent to 89.45 centimes per dollar and added 0.7 per cent to 1.2235 per euro. The MSCI All-Country World Index fell 2.4 per cent and the Standard & Poor's 500 Index slid 2.6 per cent. Benchmark US 10- year Treasury notes rose, pushing yields down to 2.70 per cent, the lowest since November. Emerging-market currencies slumped as anti-government protests in Ukraine and Thailand and a corruption investigation in Turkey involving Prime Minister Recep Tayyip Erdogan's cabinet undermined investors' confidence in the political stability of the countries. A custom Bloomberg index with equal weightings of the dollar's 20 most-traded emerging-market peers has declined 10 straight days and slipped 1.2 per cent this week. The Argentine peso weakened to a record low as the country's central bank scaled back attempts to support the currency with dollar sales. An equally weighted basket of the so-called Brics emerging- market currencies, consisting of Brazil , Russia , India , China and South Africa , fell to 93.7, its lowest level since Sept 5 . The real, ruble, rupee and rand all dropped between 1.8 per cent and 2.9 per cent. China's yuan, which is pegged daily to the dollar, was little changed. The Turkish lira fell 4.4 per cent. The only global currencies to gain versus the yen were the Liberian dollar and the Tunisian dinar.

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Source: Khaleej Times (United Arab Emirates)

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