Yen advances as U.S. expands airstrikes into Syria
By Bloomberg
The yen strengthened for a second day against the dollar as the U.S. said it conducted its first airstrikes in Syria, boosting demand for the safest assets.
Japan's currency climbed against 12 of its 16 major peers as the Israeli army said a Syrian fighter jet was shot down after it infiltrated the nation's air space. The Bloomberg Dollar Spot Index retreated the most in a week. Australia's dollar strengthened from near a seven-month low after an industry report showed Chinese manufacturing unexpectedly expanded this month, sending the yuan higher for a second day.
"A bout of risk aversion has arrived in the currency market," said Neil Jones, the head of hedge-fund sales at Mizuho Bank Ltd. in London. "I suggest geopolitical forces are causing liquidation and profit taking."
The yen appreciated 0.4 percent to 108.37 per dollar at 6:17 a.m. New York time. Japan's currency strengthened 0.1 percent to 139.69 per euro. The shared currency gained 0.3 percent to $1.2889. The Bloomberg Dollar Spot index dropped 0.3 percent to 1,053.80, its first decline in three days.
The yen advanced as the U.S. and its Arab allies sent fighter jets, bomber aircraft and Tomahawk missiles against the Islamic State, a major expansion of President Barack Obama's effort to destroy the militant Sunni group.
"U.S. military and partner nation forces are undertaking military action against ISIL terrorists in Syria using a mix of fighter, bomber and Tomahawk Land Attack Missiles," Pentagon Press Secretary Rear Admiral John Kirby said in an e-mailed statement, referring to Islamic State.
Chinese Stimulus
The Aussie rose versus all but two of its 16 major counterparts as the improvement in the China purchasing managers index suggested stimulus is helping the economy in Australia's largest trading partner.
China's preliminary PMI from HSBC Holdings Plc and Markit Economics climbed to 50.5 this month, compared with the median estimate of 50 in a Bloomberg News survey of economists and August's final reading of 50.2. Readings above 50 indicate expansion. Measures of new orders and new export orders increased at a faster rate, the report showed.
The Aussie rose 0.5 percent to 89.14 U.S. cents after sliding to 88.53 cents yesterday, the lowest level since Feb. 4. China's yuan gained 0.04 percent 6.1378 per dollar.
Australia's dollar has tumbled 2.4 percent in the past month, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The U.S. dollar rose 2.6 percent, while the yen slid 2.1 percent.
Policies Diverge
The Aussie has slumped in September amid concern China's economy is slowing and as the Federal Reserve moves closer to raising interest rates while the Reserve Bank of Australia keeps borrowing costs on hold.
"The market is getting itself very short of the Aussie," said Ray Attrill, global co-head of currency strategy at National Australia Bank in Sydney. "At some point, we may well get a squeeze higher." A short position is a bet an asset will decline.
Australia's currency will rise to 90 cents by the end of this month and close this year around 88 cents, Attrill said.
Investors should bet the euro will weaken as it has become an attractive funding currency for higher-yielding investments, New York-based BNP Paribas SA currency strategist Daniel Katzive and Vassili Serebriakov wrote in a note to clients.
The European Central Bank can implement more stimulus if required to stave off deflation, President Mario Draghi said yesterday. The ECB cut its deposit rate to minus 0.2 percent at this month's meeting.
A preliminary PMI for manufacturing in the euro area slipped to 50.5 this month from 50.7 in August and a services gauge fell to 52.8 from 53.1, Markit Economics said today.