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Yen Weakens From 2-Month High as Safety Bid Wanes; Aussie Rises

Feb. 4 (Bloomberg) -- The yen weakened from its strongest level in more than two months against the dollar as a rally in emerging-market currencies damped demand for haven assets.

The Turkish lira and South African rand gained as Standard & Poor’s 500 Index futures signaled the gauge will rebound after the biggest drop since June. Australia’s dollar jumped after the Reserve Bank dropped its reference to the currency being too strong. The euro approached a two-month low against the dollar amid speculation the European Central Bank will take measures to stimulate the economy that tend to debase the currency.

“Emerging-market currencies are stronger and the yen is impacted by that,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “The yen was pretty strong this morning but equity markets didn’t open as badly as we expected.”

The yen weakened 0.3 percent to 101.30 per dollar at 6:51 a.m. New York time after appreciating to 100.76, the strongest level since Nov. 21. It dropped 0.2 percent to 136.86 per euro. The euro slipped 0.1 percent to $1.3511 after touching $1.3477 yesterday, the weakest level since Nov. 22.

The Turkish lira appreciated 1.3 percent to 2.2551 per dollar, paring this year’s drop to 4.8 percent, and the rand climbed 1.2 percent to 11.1487 per dollar. S&P 500 futures advanced 0.4 percent after the gauge slid 2.3 percent yesterday.

The yen strengthened 6.1 percent this year, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as a slide in emerging- market currencies boosted demand for haven assets. The dollar gained 1.6 percent and the euro slipped 0.3 percent.

Stocks Stabilization

“The yen is sensitive to general shifts in risk,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “Any stabilization in equity markets would provide a pause in the dollar-yen decline, but we would view this a temporary,” he said.

The Aussie climbed against all of its 16 major peers after RBA Governor Glenn Stevens kept the overnight cash-rate target at 2.5 percent, saying in a statement “the most prudent course is likely to be a period of stability in interest rates.” The Australian dollar’s decline, which took it to the weakest level since July 2010 last month, “will assist in achieving balanced growth,” he said, dropping references in past statements that the currency was “uncomfortably high.”

The currency added 1.6 percent to 88.96 U.S. cents.

Dropped Reference

“They have dropped the reference to the exchange rate being uncomfortably high, so that’s definitely more hawkish,” Divya Devesh, a foreign-exchange analyst at Standard Chartered Plc in Singapore, said of the RBA statement. “While earlier they were keeping the door open on more easing, now they are trying to say it’s the end of the current easing cycle.”

The euro slipped for the seventh time in eight days against the dollar after ECB President Mario Draghi was said to consider ending the sterilization of crisis-era bond purchases, which would add liquidity into the region’s financial system.

“The policy debate at the ECB is gaining some momentum, which is going to be a negative for the euro,” said Morgan Stanley’s Stannard. “We see euro rebounds as providing a selling opportunity. We are looking for an initial move down to $1.33.”

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