The yen was about 0.4 percent from a four-month high against the dollar as concern that the U.S. and Europe will struggle to contain their debt spurred demand for Japan’s currency as a refuge. The yen climbed against 14 of its 16 major counterparts after Standard & Poor’s said Greece will partially default on its debt once European officials push through a second bailout for the nation. The dollar was 0.2 percent from a record low against the Swiss franc as U.S. lawmakers remained at odds on how to raise the country’s debt limit and before a report today that may show pending home sales dropped in June.
“The market is being swayed between the U.S. issue and Europe’s crisis, and people have no choice but to buy the franc and yen,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “We don’t see new factors that ease concern about the two issues.”
The yen traded at 77.93 per dollar as of 9:29 a.m. in Tokyo from 77.98 in New York yesterday, when it advanced to 77.58, the strongest since it hit a postwar record on March 17. Japan’s currency was at 111.93 per euro from 112.04 after climbing 0.9 percent yesterday.
The greenback fetched $1.4368 per euro from $1.4369. It reached $1.4536 against the 17-nation currency yesterday, the weakest level since July 5. The dollar traded at 80.14 Swiss centimes after touching a record low 79.96 yesterday. The euro was little changed at 1.15136 Swiss francs, compared with the record low 1.13737 reached July 18.
Debt Ceiling
The euro snapped a two-day advance against the dollar yesterday after S&P lowered Greece to CC. The nation will partially default once European officials push through a plan that will see bondholders pay for part of a second bailout agreed to last week, the ratings company said.
U.S. House Speaker John Boehner revised his plan to raise the $14.3 trillion debt ceiling and cut spending as he gained support among fellow Republicans for a proposal which Senate Democrats said will not pass their chamber. President Barack Obama has threatened to veto the measure as Republican leaders moved with plans to vote on it.
The Congressional Budget Office said Boehner’s new plan would cut $915 billion in spending over a decade, still short of the $2.2-trillion Senate plan. Treasury Secretary Timothy F. Geithner has said the U.S. will run out of options to prevent a default on Aug. 2.
‘Risk’ of Downgrade
“There’s a risk U.S. debt will be downgraded when you look at spending-cut plans presented by Democrats and Republicans,” said Hitoshi Asaoka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “The dollar is in a downtrend for now, while the franc and yen are being bought.”
U.S. pending home sales fell 2 percent in June after rising 8.2 percent in May, according to the median estimate of economists in a Bloomberg News survey before today’s data. IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against currencies including the euro, yen and pound, was at 74.079 from 74.093 yesterday, when it touched 73.421, the lowest level since May 5.
Bank of Japan board member Hidetoshi Kamezaki said yesterday he’s watching the yen’s recent gains with great caution as the currency’s strength could damage the economy. The BOJ will take needed policy action proactively, he said. Japanese Finance Minister Yoshihiko Noda said today he will continue to monitor financial markets closely.
N.Z. Dollar
Group of Seven nations jointly sold the yen on March 18 after it rose to a postwar record of 76.25 to the dollar the previous day, saying in a statement they wanted to reduce “excess volatility and disorderly movements.”
The New Zealand dollar advanced toward a record after the central bank kept interest rates unchanged and said it would likely remove a 50-basis-point “insurance” cut made after a February earthquake.
Gains in the currency were limited as Reserve Bank Governor Alan Bollard signaled the so-called kiwi’s strength may reduce the extent of rate increases. Swaps traders bet that borrowing costs will rise about 1 percentage point over the next 12 months.
“The statement is slightly bullish for the kiwi because it now brings in the possibility of a September rate hike, which we didn’t have before,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “It means that they can actually hike by 50 basis points in September and then pause for a while.”
New Zealand’s dollar climbed to 87.27 U.S. cents from 86.98 cents yesterday, when it reached as high as 87.66, the most since it was freely floated in 1985. It fetched 67.97 yen from 67.82.