Yen Strengthens on Speculation Economic Recovery Is Sputtering
By Ron Harui
June 25 (Bloomberg) -- The yen traded near a two-week high against the euro on speculation the global economic recovery is faltering, boosting demand for Japan’s currency as a refuge.
The dollar headed for a third weekly loss versus the yen as reports this week showed a deterioration in the U.S. housing market, backing the case for the Federal Reserve to keep interest rates near zero. The euro was poised for its first five-day decline versus the pound since the period ended June 4 on prospects that European austerity measures will hinder growth.
“Worries over the pace of the U.S.-led global recovery will probably cause risk aversion,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “The bias is for the yen to be bought.”
The yen traded at 110.50 per euro as of 8:16 a.m. in Tokyo from 110.52 in New York yesterday, when it rose to 109.54, the highest level since June 10. The U.S. currency was at 89.62 yen from 89.61 yen yesterday, when it fell to 89.23 yen, the weakest since May 21. It has lost 1.2 percent this week.
The euro bought 82.61 pence from 82.57 pence yesterday, when it fell to 81.81 pence, the weakest since November 2008. It has declined 1.2 percent this week. Europe’s single currency fetched $1.2335 from $1.2333.
U.S. reports this week showed purchases of new homes fell in May to the lowest level on record, while sales of previously owned homes also declined. The Fed reiterated that it intended to keep interest rates “exceptionally low” for an “extended period” at this week’s policy meeting.
“Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad,” the policy-setting Federal Open Market Committee said in its statement. “The pace of economic recovery is likely to be moderate for a time.”
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