Yen Rises Toward 100 as U.S. Politics Collide With Deutsche Bank
By Kevin Buckland
The yen strengthened to a one-month high as investors sought safety before the first U.S. presidential debate between Hillary Clinton and Donald Trump, and as Deutsche Bank AG sparked renewed concern about the health of Europe’s banking sector.
Japan’s currency rose against most of its Group-of-10 peers for a second day, and approached 100 per dollar, with a Bloomberg Politics poll showing Trump and Clinton before the debate in New York, clouding the outlook for U.S. policy. The yen is regarded as a haven because of Japan’s current-account surplus. Demand was also boosted as shares dropped to a record, with German Chancellor Angela Merkel reported to have state aid for the country’s largest lender.
“We only need a bad day on the equity market to push dollar-yen below 100,” said Joseph Capurso, a senior currency strategist in Sydney at Commonwealth Bank of Australia. If Trump does well in the debate, his desire to renegotiate the North American Free Trade Agreement will weigh on the Canadian dollar and Mexican peso, and may support the yen, he said.
Markets seek safety as Trump, Clinton deadlocked in polls
The yen was little changed at 100.37 per dollar as of 9:32 a.m. in Tokyo, after touching 100.09, the strongest since Aug. 26. Japan’s currency advanced 0.1 percent to 112.83 per euro, after rising 0.4 percent Monday. Mexico’s peso fell to a record 19.9333 against the greenback.
Investors added to bullish yen positions versus developed-market currencies during the past week, according to BNP Paribas SA’s relative G-10 FX data that compare the current market with positions during the prior five years.
"The market flipped to a yen-long positioning at the start of the year as a hedge against risk-off," said Sam Lynton-Brown, a foreign-exchange strategist at BNP Paribas. A long position is a bet that an asset will increase in value.
The U.S. presidential candidates have clashed on a series of issues including trade, immigration and foreign policy. Clinton, a former Secretary of State in Barack Obama’s administration, is likely to offer more continuity with the current regime, while Trump, a real-estate developer and former TV personality, is a less conventional candidate, and has been a vocal critic of the current president.
"The market has been ignoring the U.S. election as a risk just as it had with Brexit," said Peter Rosenstreich, head of market strategy of Swissquote Bank SA. "But the combination of new elections polls and uncertainty of tonight’s debate has put the market on edge."
Deutsche Bank shares dropped to a record low in Frankfurt Monday and its riskiest bonds declined after a media report said the German government wouldn’t step in to back the lender, fueling investor concerns about its weakened finances.
The U.S. Justice Department is seeking a $14 billion fine even as Chief Executive Officer John Cryan tries to shore up profitability and capital by cutting thousands of jobs and shrinking operations. The larger-than-expected sum has sparked concerns that the lender will be forced to tap investors.
Canada’s dollar fell 0.2 percent to 75.700 yen after touching, 75.414 the weakest since June 2012. Bank of Canada Governor Stephen Poloz said the economy needs three-to-five years to restructure after the oil shock.