The yen reached the weakest in almost six years versus the dollar as Japanese reports showing a slump in business spending and a shrinking current-account surplus added to signs the economy is losing momentum.
The pound slid to its lowest since November against the dollar after a poll showed the campaign for Scottish independence leading opponents for the first time this year, stoking concern the 307-year union forming the U.K. will splinter after the Sept. 18 vote. South Africa’s rand fell to a one-month low. The offshore yuan climbed to an almost six-month high after data showed China’s trade surplus rose to a record.
“The Bank of Japan might have to ease again given the recent weakness in economic performance,” said Sireen Harajli, a Mizuho Bank Ltd. strategist in New York, said in a phone interview. “The risk is for the yen to be weaker.”
The yen sank 0.7 percent to 105.84 per dollar at 12:52 p.m. New York time and reached 105.86, the weakest level since October 2008. Japan’s currency fell 0.6 percent to 136.87 per euro. The dollar rose 0.1 percent to $1.2934 per euro.
The pound dropped 1.1 percent to $1.6141 after falling to $1.6103, the weakest since Nov. 21. The decline was the biggest since July 2013.
A measure of foreign-exchange market price swings was almost at a four-month high. JPMorgan Chase & Co.’s Global FX Volatility Index rose to 6.62 percent after reaching 6.64 percent on Sept. 4, the highest on a closing basis since April and up from an all-time closing low on of 5.29 percent on July 3. The average over the past year is 7.34 percent.
The yen declined 1.5 percent in the past month in a basket of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro dropped 1.9 percent, while the dollar strengthened 2.1 percent.
Japan’s Cabinet Office said annualized gross domestic product shrank 7.1 percent in the second quarter, compared with the forecast of 7 percent in a Bloomberg survey. Business spending slid 5.1 percent and the adjusted current-account surplus narrowed to 99.3 billion yen ($941 million) in July from 125.6 billion yen the previous month.
If Japan’s economy continues to be weak in the July- September quarter, “that would raise expectations for additional easing by the Bank of Japan and curb demand for the yen,” said Daisaku Ueno, the Tokyo-based chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities Co.
The speculation comes as the Federal Reserve considers when to raise U.S. interest rates for the first time since 2006.
The Japanese currency will weaken to 107 per dollar by the end of the first quarter, according to the median estimate of economists in a Bloomberg survey.
The rand slumped 0.9 percent to 10.7885 per dollar and reached a one-month low of 10.7887 before a report tomorrow that’s forecast to show the nation posted a wider current account deficit in the second quarter.
The offshore yuan gained as a report showed China’s trade excess rose to $49.84 billion in August from July’s $47.30 billion. Exports expanded 9.4 percent, beating the 9 percent median forecast in a Bloomberg survey,
The currency added 0.1 percent to 6.1359 per dollar, data compiled by Bloomberg show. It earlier advanced to 6.1338, the strongest level since March. China’s onshore financial markets are closed for a public holiday.
The Bloomberg Dollar Spot Index, which tracks the greenback against a basket of 10 leading global currencies, climbed 0.5 percent to 1,043.28 and reached 1,043.31, the highest since July 2013.
The U.S. Labor Department reported last week employers added 142,000 workers in August, the least this year. That was below the lowest estimate in a Bloomberg survey of economists. The data followed Institute for Supply Management reports that showed manufacturing and service industries expanded.
The Fed, which meets next week, is on track to end a bond- buying program under quantitative easing in October. Futures trading shows a 53 percent chance the U.S. central bank will raise its benchmark interest-rate target to at least 0.5 percent by July 2015.
Sterling fell the most against the dollar among 31 major counterparts after a poll by YouGov Plc showed the Scottish independence campaign gained a lead for the first time this year before the Sept. 18 referendum.
A “Yes” vote would raise the prospect of a more cautious approach from the Bank of England, which this month kept its key interest rate at a record-low after persistent weakness in inflation and wage growth.
“We’ve clearly seen markets taking on board that it’s just not a tail risk but a much more significant event risk,” Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce, said by phone from London. “We’re still of the view there likely will be a no-vote and the union will be sustained. For those that are brave enough, there will be opportunity to pick up sterling at cheaper levels once the smoke clears.”
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