Dollar Near 6-Month High Against Yen on Economy; Euro Holds Gain on Greece

Feb 22, 2012 -- The dollar was 0.1 percent from a six-month high against the yen before U.S. data expected to show stabilization in the housing market.

The euro was 0.4 percent from a three-month high versus Japan’s currency as the Greek government won a second bailout and sent debt-swap and austerity measures to parliament for approval. The U.S. currency held a four-day gain on speculation accelerating economic growth will reduce the case for more quantitative easing from the Federal Reserve. The Bank of Japan increased its asset-purchase fund to 30 trillion yen ($376 billion) last week.

"The stronger the U.S. economy, the stronger the sense that the interest-rate story will turn around and some of the strength in the yen relative to the U.S. dollar starts to reverse course,” said Gavin Stacey, a strategist at Barclays Capital in Sydney. “The risk-on tone is seeing some of the yen strength dissipate.”

The dollar was at 79.80 yen as of 8:42 a.m. in Tokyo from 79.74 yesterday. The greenback touched 79.89 on Feb. 20, the strongest since Aug. 4. The euro traded at 105.62 yen from 105.54 yesterday, when it touched 106.01, the highest since Nov. 14. The 17-nation currency was little changed at $1.3236.

Sales (ETSLTOTL) of previously owned homes probably rose for a fourth month in January, climbing 1.1 percent to a 4.66 million annual rate, the highest level since May 2010, according to the median estimate of economists surveyed by Bloomberg News before the National Association of Realtors releases its data today.

Greek Bailout

Euro-area finance ministers awarded 130 billion euros ($172 billion) in aid to Greece and reached an accord for greater debt relief from investor representatives in an exchange offer to tide the nation past a bond redemption next month.

Greece’s government agreed to fiscal measures, a voluntary debt swap known as private-sector involvement, or PSI, and collective action clauses for bonds. Legislation needed to carry out those measures was submitted to lawmakers and posted on the Hellenic Parliament’s website.

The implied volatility of three-month options for Group of Seven currencies fell as low as 9.97 percent yesterday, the least since Feb. 13, according to the JPMorgan G7 Volatility Index. A decrease makes investments in currencies with higher benchmark lending rates more attractive because it shows the risk is less that market moves will erase profits on such trades.

The BOJ on Feb. 14 unexpectedly expanded its asset-purchase program to 30 trillion yen from 20 trillion, with 19 trillion set aside for government bonds. Japan’s central bank also said it will target 1 percent inflation “for the time being.” The nation’s consumer prices fell at a 0.2 percent annual rate in December, government data show.

"Japan has come out and done their own quantitative easing,” said Barclay’s Stacey. “The surprise QE announcement from the central bank in Japan is weighing on recent yen weakness.”