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Yen Strengthens as Growth Concern Boosts Safety Bid; Euro Falls

Feb. 5 (Bloomberg) -- The yen rose against most major counterparts as concern that growth in the U.S. and emerging markets is slowing fueled demand for the haven currency.

The euro fell toward a 10-week low versus the yen as retail sales in the region slumped and amid speculation the European Central Bank will hold down interest rates. A report from the ADP Research Institute will show U.S. companies added fewer jobs in January, according to the median forecast of economists in a Bloomberg News survey. Ukraine’s hryvnia weakened for a fourth day on concern the nation is running out of currency reserves. The Russian ruble jumped.

“There is a fear that contagion from emerging markets may lead to a sharper hit to global growth and that’s prompting investors to remain more risk averse,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The risk is that we continue to see some weakness in the U.S. data in the near term.”

The yen climbed 0.5 percent to 101.12 per dollar at 7:42 a.m. New York time, following a 0.7 percent slide yesterday, the most since Jan. 14. It climbed 0.5 percent to 136.67 against the euro after appreciating to 136.23 yesterday, the strongest since Nov. 22. Europe’s common currency was little changed at $1.3516.

Hardman said the dollar-yen exchange rate may fall further and test support at the 100 level. A support level is an area on a price graph where analysts expect buy orders to be clustered.

China Concern

Developing-nation currencies and stocks have fallen this year on speculation that economic growth in China is weakening. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said uncertainty about China poses the biggest risk to financial markets.

“I call China the mystery meat of emerging-market countries,” Gross said yesterday during an interview with Bloomberg Television. “Nobody knows what’s there,” he said. “We’re just going to have to wonder going forward through this year as to the potential problems in China and other emerging markets.”

China data due on Feb. 12 will show growth in both exports and imports slowed last month, according to analyst forecasts.

The Bloomberg Dollar Spot Index fell for a third day, declining 0.1 percent to 1,027.02. The index tracks the value of the greenback against its major peers, including the euro, the yen and the Canadian dollar.

U.S. Jobs

A report from ADP Research Institute will show U.S. companies added 185,000 jobs in January after creating 238,000 positions the previous month, economists estimated in a Bloomberg survey.

Separate data from the Labor Department due on Feb. 7 are forecast to indicate non-farm payrolls grew by 184,000, compared with a December increase of 74,000 that was the smallest since January 2011.

Among emerging currencies, Ukraine’s hryvnia weakened for a fourth day and the Russian ruble strengthened as investors judged recent stock declines as overdone.

A Bloomberg survey of analysts showed the nation’s reserves probably slid to $18.8 billion in January from $20.4 billion a month earlier. That would tie November for the lowest level since 2006, before Russia pledged $15 billion in emergency loans a month later.

The currency dropped 1.1 percent to 8.8750 per dollar.

The ruble climbed for a second day, strengthening 0.5 percent to 34.90 per dollar after slumping to its lowest level in almost five years on Feb. 3.

Retail Sales

The euro fell for the fifth time in six days versus the yen after the European statistics office in Luxembourg said retail sales in the region fell 1.6 percent in December from a revised 0.9 percent increase a month earlier. The median estimate of economists surveyed by Bloomberg was for a decline of 0.7 percent.

“Against the backdrop of a subdued euro area after the retail sales and ongoing equity-market uncertainty, euro-yen may well continue to probe the downside,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “We can maybe get all the way down to 135.”

The ECB will hold its benchmark interest rate at a record- low 0.25 percent tomorrow, according to economists surveyed by Bloomberg News, as it faces slowing inflation.

The European Union’s statistics office said last week that consumer-price growth slowed in January to match the least since November 2009. After the Jan. 9 policy meeting, ECB President Mario Draghi said the central bank “strongly emphasizes” that it will maintain accommodative measures for as long as necessary.

Markit Economics’ composite gauge of manufacturing and services output was at 52.9 in January, from 52.1 the previous month. That’s lower than an earlier estimate of 53.2. A reading above 50 marks expansion.

Traders’ expectations of future market swings fell for a third day. Deutsche Bank AG’s volatility index, based on option premiums on nine major currency pairs, dropped to 8.12 percent.

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