The dollar slumped to its lowest level in five weeks against the yen as U.S. Treasury yields fell amid signs of an uneven recovery in the world’s biggest economy.
The U.S. currency dropped below its 200-day moving average versus the yen for a third straight day as worse-than-expected U.S. economic data supported bets the Federal Reserve will keep borrowing costs near zero. New Zealand’s dollar briefly rose to within half a cent of a record high. The South Korean won advanced to the strongest since August 2008. Sweden’s krona weakened to a 2 1/2-year low against the euro as retail sales data boosted speculation the Riksbank will cut rates next week.
The dollar has come under pressure and that’s a function of the yields coming back down,” Ian Stannard, head of European currency strategy at Morgan Stanley in London, said by telephone. Dollar-yen “breaking through the 200 day-moving average is obviously a significant event as far as market activity is concerned and that opens the way for dollar-yen to come under some further pressure.”
The dollar dropped 0.3 percent to 101.42 yen at 10:01 a.m. London time after sliding to 101.32, the lowest since May 21. The 200-day moving average was at 101.71 yen. The greenback has fallen 0.7 percent since June 20, heading for its steepest drop versus the yen since the five days ended April 11.
The U.S. currency depreciated 0.1 percent to $1.3621 per euro, set for a 0.2 percent weekly decline. The yen advanced 0.3 percent to 138.12 per euro, on course for a 0.5 percent five-day gain.
“For currency traders, breaking below the 200-day moving average is a big deal,” said Kumiko Ishikawa, a currency analyst at Gaitame.com Research Institute Ltd. in Tokyo. “It’s going to become an important psychological barrier.”
The yen gained amid speculation the Bank of Japan will refrain from boosting monetary stimulus after official data showed Japanese consumer prices rose last month at the fastest pace in more than three decades, while the unemployment rate fell to the lowest since 1997.
U.S. government reports this week showed gross domestic product shrank more than previously estimated in the first quarter, while durable-goods orders unexpectedly declined in May. Citigroup Inc.’s U.S. Economic Surprise Index, a gauge of whether data beat or fell short of economists’ forecasts, dropped to minus 23.1 yesterday, the lowest since May 1.
The yield on the benchmark 10-year Treasury note fell as much as two basis points, or 0.02 percentage point, to 2.51 percent, the lowest since June 2.
“The market is giving up on some long dollar positions,” said Greg Gibbs, head of Asia-Pacific markets strategy at Royal Bank of Scotland Group Plc in Singapore, referring to bets the U.S. currency would appreciate. “Yields lower in the U.S. in recent sessions does contribute to the down move in dollar-yen.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, slipped 0.1 percent to 1,006.58, extending this week’s decline to 0.3 percent, the most since the period ended May 2. It has fallen 1.3 percent since Dec. 31, the first drop within the first six months of any year since 2011.
New Zealand’s currency dropped 0.2 percent to 87.63 U.S. cents. It earlier climbed to 87.94, approaching the high of 88.43 set on Aug. 1, 2011, that was the strongest since exchange-rate controls were scrapped in 1985. The kiwi has risen 0.8 percent since June 20, heading for a fourth weekly gain, the longest streak since April 2013.
The won gained 0.3 percent to close at 1,013.60 per dollar in Seoul after official data today showed South Korea’s current-account surplus widened and foreign direct investment increased. It earlier touched 1,013.25, the strongest level since August 2008, and posted a 0.7 percent weekly advance.
“The reports are helping bolster expectations for more gains in the won,” said Hong Seok Chan, a Seoul-based currency strategist at Daishin Economy Research Institute. “Increasing foreign direct investments are a clear endorsement of confidence in Korea’s economic fundamentals.”
Sweden’s krona tumbled against all but one of 16 major peers after a report showed retail sales dropped 0.7 percent last month, more than double the 0.3 percent slide predicted by economists surveyed by Bloomberg. Riksbank policy makers will announce their decision on rates on July 3.
The Swedish currency declined 0.3 percent to 9.1971 per euro after reaching 9.2094, the weakest level since November 2011. It depreciated 0.2 percent to 6.7502 per dollar and headed for a third straight weekly decline, its longest losing streak since April.
By Lucy Meakin and Kevin Buckland-Bloomberg