Yen and Swiss Franc Gain on Global Slowdown Signs, Reduced Risk Appetite

The yen and the Swiss franc rose against their major counterparts as signs the global economic recovery is faltering increased demand for assets perceived as a haven.

Japan’s currency snapped a two-day losing streak against the dollar after a report showed the nation’s gross domestic product expanded at a slower-than-expected pace. The greenback also slid against the euro on speculation last week’s 4 percent surge, the most since May, wasn’t justified given the outlook for economic growth in the U.S. Data tomorrow is forecast to show German investor confidence fell.

“Risk aversion is driving yen and franc strength,” said Stephan Maier, a foreign-exchange strategist at UniCredit SpA in Milan.

The yen gained to 109.65 per euro at 11:33 a.m. in London from 109.92 in New York on Aug. 13. Japan’s currency climbed to 85.56 against the greenback from 86.20 last week. The Swiss franc jumped 1 percent to 1.3277 per euro. The dollar fell to $1.2816 per euro from $1.2754 after reaching $1.2734, the highest since July 21. Its 4 percent rally last week was the biggest since the period ended May 7.

The franc rose as the Stoxx Europe 600 Index of European equities declined 0.4 percent and futures for September delivery on the Standard & Poor’s 500 Stock Index fell 0.2 percent.

Japan’s economy expanded at an annualized 0.4 percent rate in the three months to June 30, according to government data released today. That compares with the median economist estimate for 2.3 percent growth in a Bloomberg News survey.

ZEW Report

The ZEW Center for European Economic Research’s index of German investor and analyst expectations, which aims to predict developments six months ahead, fell to 20 in August from 21.2 in July, a separate survey showed ahead of tomorrow’s data.

Eisuke Sakakibara, formerly Japan’s top currency official, said the yen may rise to a record against the dollar because of concern over the health of the U.S. economy.

“What we are seeing is not appreciation of the yen, but weakness of the dollar, reflecting concerns that the U.S. economy may falter,” Sakakibara said yesterday on the Fuji television network. “There is a chance the yen will reach an all-time high and stay at that level for the time being.”

Japan’s currency last week retreated from a 15-year high versus the dollar on speculation the nation’s government will sell the yen to help exporters.

Lawmakers from Japan’s ruling party last week urged Prime Minister Naoto Kan to consider intervening in the currency market for the first time since 2004. They also called on the Bank of Japan to “engage in large-scale monetary easing.”

Intervention Speculation

Kan and Bank of Japan Governor Masaaki Shirakawa may meet this week to discuss measures to address the yen’s strength, the Asahi newspaper reported on Aug. 13. Kan said he’s “concerned” about the yen’s recent appreciation, Kyodo News reported on Aug. 14.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major trading partners, fell to 82.656 from 82.948 on Aug. 13.

U.S. retail sales rose in July by less than economists had forecast and core consumer prices grew at a rate that matched the smallest year-on-year gain in 44 years, government reports showed on Aug. 13.

“The dollar moved too fast last week and is giving some of those gains back,” said Niels Christensen, chief currency analyst at Nordea Bank AB in Copenhagen, the most accurate euro- dollar forecaster among 48 analysts in a Bloomberg survey in the 18 months ended in June. “Our view on the dollar isn’t positive.”

The dollar will fall to $1.32 in three months before trading at $1.27 in six months, Christensen said.