Yen strength­ens on gold de­mand as stocks, oil re­treat

The Pak Banker - - MARKETS/SPORTS -

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.

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