Yen strengthens on gold demand as stocks, oil retreat
The yen gained and gold climbed after China cut the yuan's fixing by the most in six weeks, spurring demand for havens. European stocks and emerging markets fell while oil declined with copper.
Japan's currency strengthened against all of its 16 major peers and gold rose for the first time in three days after the People's Bank of China reduced the reference rate by more than some analysts forecast. Emergingmarket stocks retreated from a six-week high. BHP Billiton Ltd. led commodity producers lower after making a larger-thanexpected cut to its dividend. Crude fell and industrial metals declined, with zinc slipping back after entering a bull market on Monday.
"Part of the reason for the yen rise was the higher fix of the dollar-yuan," said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. "The fact that the upward momentum in the U.S. and European equities failed to follow through in the Asian trading session overnight also provided a more supportive environment for the yen." The boost in demand for haven assets is a sign that China still has the capacity to disrupt the relative calm in markets that led to a rebound in commodities and stocks in the past week. BHP Billiton's first cut in its payout in 15 years and a surprise loss posted by Standard Chartered Plc show how the global slow- down and tumbling prices for metals and oil are weighing on earnings. Britain's referendum on its membership in the European Union is also raising currency-market risks across the continent, with the cost of options protecting against losses on the euro jumping. The yen gained 0.8 percent to 111.98 per dollar at 10:17 a.m. in London, rallying from a decline Monday.
The yuan fell 0.1 percent to 6.5297 a dollar, according to China Foreign Exchange Trade System prices. The PBOC lowered the daily reference rate 0.17 percent. The fix was lower than most models were expecting, said Sue Trinh, the head of Asia foreign-exchange strategy at Royal Bank of Canada. China's shock devaluation of the yuan in August triggered a bout of global market turmoil.
The pound dropped 0.3 percent to $1.4110, while the euro slid 0.2 percent to $1.1008. The U.K.'s potential exit may damage trade and encourage other members to renegotiate their relationship with the EU, signaling scope for further losses in the euro in the run-up to Britain's June 23 referendum. The Swiss franc added 0.6 percent to 1.09584 per euro. The Stoxx Europe 600 Index lost 0.5 percent, paring losses of as much as 1.1 percent. BHP Billiton dragged commodity producers to the worst performance of the 19 industry groups on the equity benchmark. The world's biggest mining company fell 4.7 percent as collapsing prices led to a 92 percent tumble in first-half profit. Standard Chartered dropped 6.1 percent as revenue missed estimates and loan impairments almost doubled to the highest in its history.
Standard & Poor's 500 Index futures slipped 0.4 percent. The equity gauge rose to a six-week high on Monday as a surge in oil assuaged concerns about global growth.
Macy's Inc. and Home Depot Inc. are among 10 companies reporting earnings Tuesday and may provide indications of the health of U.S. retailers. Data on consumer confidence and existing home sales is also due. The MSCI Emerging Markets Index fell from a six-week high, losing 0.3 percent.