“The yen weakened for a second day against the dollar before the Federal Reserve starts a two-day meeting today that may provide more information about when the central bank will start to reduce bond purchases.

Japan’s currency declined versus all except one of its 16 major counterparts after the central bank estimated the current-account balance increased to a record amid unprecedented monetary stimulus. The euro climbed to a four-month high against the dollar as German economic sentiment improved more than economists forecast. Australia’s dollar weakened for a third day after the Reserve Bank indicated the currency may fall further.

“We’re looking for the dollar to resume its uptrend versus the yen,” said Ian Stannard, head of European foreign-exchange strategy at Morgan Stanley in London. “The market can take advantage of any suggestions by the Fed that they are close to reducing bond purchases. The yen should remain under pressure across the board.”

The yen declined 0.9 percent to 95.33 per dollar at 7:07 a.m. in New York after depreciating 0.2 percent yesterday. Japan’s currency weakened 0.9 percent to 127.48 per euro. The euro gained 0.1 percent to $1.3374 after rising to $1.3399, the highest level since Feb. 20.

The JPMorgan Global FX Volatility Index increased to 10.35 percent from 10.25 percent yesterday after climbing to a one-year high of 11.43 percent on June 13. The average in the past 12 months is 8.65 percent.

‘Remain Vague’….”

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“Emerging-market currencies weakened, led by India’s rupee and Russia’s ruble, as investors awaited the outcome of a Federal Reserve meeting. Most developing-nation stocks rose as Philippine and Indonesian equities rallied.

The rupee headed for a record-low close against the dollar and the ruble slid 1 percent. TheBloomberg-JPMorgan Asia Dollar Index (ADXY), which tracks the region’s 10 most-traded currencies, slid to the lowest level since Sept. 12. The Federal Open Market Committee starts a two-day policy meeting today, a month after Chairman Ben S. Bernanke said stimulus efforts could be scaled back if the employment outlook shows sustainable improvement.

“The market is not sure what exactly the FOMC will say but is adjusting to the risk of an announcement of early tapering of quantitative easing,” Gaelle Blanchard, senior emerging-market strategist at Societe Generale SA in London, said by e-mail.

About three stocks advanced for every two that fell in the MSCI Emerging Markets Index, which lost 0.4 percent to 953.76 at 12:45 p.m. in London. SM Investments Corp. (SM) drove the Philippine benchmark gauge to the largest three-day gain since September 2011. Indonesian equities rallied after the nation’s parliament approved a revised budget.

The rupee sank 1.5 percent versus the dollar and the Malaysian ringgit slid 0.7 percent. The Bloomberg-JPMorgan Asia Dollar Index lost 0.3 percent. Hungary’s forint weakened 1 percent versus the euro. South Africa’s rand dropped 0.7 percent, extending declines in the past month to 6.3 percent.

Turkey Raids…”

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“Australia’s dollar rose, extending its first weekly gain against the greenback in six, amid speculation record bets on its decline may be overdone.

The Aussie rebounded from its biggest drop in a week before minutes tomorrow from theReserve Bank of Australia that could point to the timing of a potential interest-rate cut. The Australian and New Zealand dollars climbed against their 15 major peers before a Federal Reserve meeting this week that may provide clues on when policy makers will begin curtailing quantitative easing. The kiwi dollar touched the highest this month against its Australian counterpart after New Zealand’s consumer confidence climbed to the most in three years.

“Positioning is at record extremes” in the Australian dollar, said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. Trading “should remain largely choppy, but there’s a risk of potential short-covering,” she said. A short position is a bet an asset’s price will fall.

The Australian dollar rose 0.5 percent to 96.21 U.S. cents at 5:02 p.m. in Sydney from June 14, when it dropped 0.7 percent, the most since June 7. It gained 0.8 percent last week. The Aussie strengthened 1.7 percent to 91.55 yen.

The New Zealand dollar advanced 0.6 percent to 80.94 U.S. cents, and gained 1.5 percent to 76.97 yen. It was little changed at NZ$1.1894 per Australian dollar after earlier gaining to NZ$1.1850, the highest since May 29.

Record Shorts…”

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“Traders at some of the world’s biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice.

Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set, said the current and former traders, who requested anonymity because the practice is controversial. Dealers colluded with counterparts to boost chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years.

The behavior occurred daily in the spot foreign-exchange market and has been going on for at least a decade, affecting the value of funds and derivatives, the two traders said. The Financial Conduct Authority, Britain’s markets supervisor, is considering opening a probe into potential manipulation of the rates, according to a person briefed on the matter.

“The FX market is like the Wild West,” said James McGeehan, who spent 12 years at banks before co-founding Framingham, Massachusetts-based FX Transparency LLC, which advises companies on foreign-exchange trading, in 2009. “It’s buyer beware.”

The $4.7-trillion-a-day currency market, the biggest in the financial system, is one of the least regulated. The inherent conflict banks face between executing client orders and profiting from their own trades is exacerbated because most currency trading takes place away from exchanges.

Benchmark Investigations…”

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“Australia’s dollar rebounded from the lowest level in almost three years as a technical indicator signaled recent selling was overdone.

The Aussie snapped a three-day slide after tumbling 9.2 percent since the end of March, set for the biggest quarterly decline since the period ended September 2011. The currency advanced after a private report showed that Australia’s consumer confidence recovered in June after slumping the most in 17 months. New Zealand’s kiwi dollar climbed.

There are “probably quite a few people who’ve got short the Australian dollar near the lows yesterday, and they’re now suffering a painful squeeze,” said Ray Attrill, the global co-head of foreign-exchange strategy in Sydney at National Australia Bank Ltd. “At the moment, there’s the potential for a squeeze up to 95 or 96” U.S. cents, he said. A short position is a bet that an asset’s price will fall.

The Australian currency gained 0.4 percent to 94.65 U.S. cents as of 5:05 p.m. in Sydney from yesterday, when it touched 93.26, the lowest since Sept. 14, 2010. It earlier climbed as much as 0.8 percent. The New Zealand dollar rose 0.4 percent to 79.02 U.S. cents after earlier rallying as much as 0.6 percent….”

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“Some investors make their biggest money in times of market volatility, but that wasn’t the case for currency hedge funds last month.

They suffered from the dollar’s moves up and down, The Wall Street Journal reports.

The Parker Global Currency Managers Index, which tracks the returns of 17 funds in which Parker Global Strategies invests, dipped 0.58 percent last month, according to preliminary data from the company.

That compares with a 2.1 percent gain for the Standard & Poor’s 500 Index.

The dollar index, which measures the currency against six major counterparts, moved up and down between 81 and 85 in May. That’s a trading band of 5 percent from bottom to top.

The volatility has come among uncertainty about when the Federal Reserve will begin tapering its quantitative easing policy….”

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“Australia’s dollar fell to the lowest in almost three years versus the greenback after home-loan approvals grew at the slowest pace in three months, boosting the case for further cuts to borrowing costs.

Australia’s currency slid for a third day amid speculation the Federal Reserve will reduce stimulus this year, narrowing Australia’s interest-rate advantage. The Aussie and New Zealanddollars dropped against the yen after the Bank of Japan kept monetary policy unchanged, disappointing investors who had expected it to introduce measures to stem market volatility. The kiwi dollar was set for its lowest close in a year.

“Housing is the one area most likely to make up for the mining investment downturn, and it’s disappointed,” said Joseph Capurso, a Sydney-based foreign-exchange strategist atCommonwealth Bank of Australia. “You’ve got to say that the Aussie’s going to keep on falling.”

Australia’s dollar slid 1.1 percent to 93.61 U.S. cents as of 5:18 p.m. in Sydney after touching 93.54, the lowest since September 2010. New Zealand’s currency fell 0.9 percent to 78.34 U.S. cents, set for its weakest close since June 2012. The Aussie dropped 1.6 percent to 92.02 yen, while the kiwi tumbled 1.4 percent to 76.94 yen.

Australian home-loan approvals rose 0.8 percent in April from the month before, the smallest increase since January. Economists surveyed by Bloomberg News forecast a 2 percent rise. March’s gain was revised to 4.8 percent from 5.2 percent.

Reserve Bank of Australia Governor Glenn Stevens and his board reduced the overnight cash-rate target to a record 2.75 percent last month. A benign inflation outlook gave them scope to help industries including construction to rebalance growth away from resource investment….”

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“Australia’s dollar dropped versus the yen, set for its worst weekly rout since 2011, before Chinese data tomorrow forecast to show growth in imports slowed, dimming the demand outlook for commodities.

Implied volatility of the Aussie against the U.S. currency was set for a sixth weekly advance, the longest in two years, before a U.S. jobs report today that may help investors estimate when the Federal Reserve will start reducing monetary stimulus. Australia’s government bonds extended their gains to a third day amid increasing bets the Reserve Bank will cut borrowing costs to shore up economic growth.

“We’re bearish on the currency,” said Andrew Salter, a currency strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney, referring to the Aussie. It’s a little bit of a surprise that “Chinese growth is so sluggish,” he said.

The Australian currency dropped 1 percent to 92.13 yen as of 5:10 p.m. in Sydney after touching 90.84, the least since Jan. 2. It’s slumped 4.2 percent in the five days through today, poised for the biggest plunge since September 2011. New Zealand’s kiwi dollar declined 0.6 percent to 77.31 yen, having fallen 3.2 percent this week.

Australia’s dollar slid 0.8 percent to 95.17 U.S. cents, extending its fifth weekly drop to 0.6 percent. New Zealand’s dollar lost 0.5 percent to 79.86 U.S. cents, trimming its weekly advance to 0.5 percent.

Australian Yields

The yield on Australia’s benchmark 10-year government note dropped 9 basis points to 3.26 percent, extending its weekly decline to 10 basis points. Similar-maturity note yields in New Zealand fell 5 basis points to 3.55 percent…”

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“Japanese Finance Minister Taro Aso said that the government won’t intervene in the currency market for now after the yen strengthened by the most in three years against the dollar.

“We are carefully watching, but we don’t have any immediate intention of taking any action, such as intervention,” the finance minister told reporters in Tokyo today. The yen jumped 0.7 percent to 96.28 per dollar as of 1:47 p.m. local time.

Japan’s currency surged 2.2 percent yesterday, adding to the headwinds of a slide in stocks and volatility in bonds as Prime Minister Shinzo Abe campaigns to revive the world’s third-biggest economy. As attention turns to a Bank of Japan meeting on June 10-11, Governor Haruhiko Kuroda’s actions may be limited by his pledge to avoid “incremental” steps after announcing a plan to double the monetary base over two years.

“Stocks rose and the yen weakened between November and May at a very rapid pace, driven by expectations for Abenomics and Kuroda-nomics, exceeding the pace of the economy’s fundamental improvement,” said Hiroaki Muto, a senior economist in Tokyo at Sumitomo Mitsui Asset Management. “The markets are now going through an adjustment phase from the too-rapid moves.”

Muto said that the “adjustment” is probably temporary because the Japanese economy is making gains. At the same time, he said the government may consider another jolt of fiscal stimulus.

Market Outlook…”

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“There are rip-your-face-off rallies and then there are the rip-your-face-off retreats—the kind Wall Street experienced Thursday during a brief but vicious yen surge.

At one point, the U.S. dollar lost about 4 percent to the Japanese currency as the pair trade tumbled through its 50-day moving average.

The move sent the Dow industrials plunging 115 points after flirting with positive territory through most of the early session, and delivered a quick but palpable shock through all levels of financial markets.

“Right now this just looks like a bunch of nervous hands,” said Christopher Vecchio, currency analyst at DailyFX. “The dollar was a very extended trade. This is the unwinding of that very crowded trade.” …”

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“The euro strengthened to a four-week high versus the dollar amid speculation European Central Bank President Mario Draghi will today reassure investors the region’s economy will recover later this year.

Europe’s shared currency rose against most of its 16 major counterparts after the ECB refrained from cutting its main refinancing rate at its monthly policy meeting. The pound advanced for a second day against the dollar as the Bank of England left its asset-purchase target and benchmark rate unchanged. The Australian dollar slid to the weakest level since 2011 as the nation’s shrinking interest-rate advantage over its peers reduced the currency’s allure.

“Given that some indicators have improved and financial conditions are better Draghi might have a more moderate tone,” said Chris Walker, a currency strategist at Barclays Plc in London. “The euro is at the top of its recent range. At the same time, the medium-term growth outlook isn’t that good.”

The euro rose 0.2 percent to $1.3121 at 12:47 p.m. London time after advancing to $1.3131, the highest level since May 9. The single currency advanced 0.2 percent to 129.97 yen. The yen was little changed at 99.07 per dollar after appreciating to 98.84, the strongest since May 9.

JPMorgan Chase & Co.’s Group-of-Seven Volatility Index, based on currency option premiums, fell to 10.08 percent after rising to 10.24 percent on May 31 and June 3, the highest level since Feb. 26.

Benchmark Rate….”

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“The Australian dollar fell to the lowest level since 2011 as the nation’s shrinking interest-rate advantage over its peers damps the allure of the currency.

Insight Investment Management Ltd., which oversees about $134 billion in fixed income and currencies, has been selling the Aussie as the yield spread between Australia’s sovereign debt and its global peers narrowed by almost half a percentage point since March. The Australian and New Zealand dollars slid against the yen for a third day as Asian stocks extended a global rout, sapping demand for riskier assets.

“The Aussie’s trend is clearly downward,” said Kengo Suzuki, the chief currency strategist at Mizuho Securities Co. in Tokyo, a unit of Japan’s third-biggest financial group by market value. “The Australian dollar remains susceptible to selling when markets are in a risk-off situation.”

Australia’s currency dropped 0.6 percent to 94.81 U.S. cents as of 5:11 p.m. in Sydney after touching 94.35, the weakest since Oct. 4, 2011. New Zealand’s kiwi dollar fell 0.2 percent to 79.53 U.S. cents after reaching 79.03, the lowest since July 26. The Aussie slid to 93.45 yen, a level unseen since Feb. 27, before trading at 94.18, 0.4 percent lower than yesterday. New Zealand’s currency was little changed at 78.99 yen….”

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“The yen strengthened versus the dollar and euro as Japanese stocks slumped after Prime Minister Shinzo Abe failed to provide additional detail on stimulus measures, boosting demand for safer assets.

The euro declined against the dollar after a report showed the region’s economy shrank in the three months through March, in line with an earlier estimate. A volatility measure of Group-of-Seven currencies approached the highest since February. Australia’s dollar fell after the nation’s gross domestic product grew at the slowest pace in almost two years. The pound advanced as a report showed services output in the U.K. expanded in May by the most in more than a year.

“There’s general disappointment that Abe didn’t announce anything that was surprising or new,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “There’s some disappointment in Japanese stocks and that’s pushing the yen up. The Aussie is likely to remain pressured after the GDP (AUNAGDPC) data.”

The yen advanced 0.5 percent to 99.58 per dollar as of 7:01 a.m. in New York after reaching 98.87 on June 3, the strongest since May 9. Japan’s currency appreciated 0.6 percent to 130.08 per euro. Europe’s shared currency dropped 0.1 percent to $1.3063.

Japan’s currency gained against all but one of its 16 major counterparts after the Topix index of shares closed down 3.2 percent….”

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“The yen weakened as Asian and European stocks gained amid waning speculation that theFederal Reserve will reduce monetary stimulus.

Japan’s currency depreciated beyond 100 per dollar after climbing to the strongest in three weeks yesterday. Australia’s dollar declined versus all of its 16 major counterparts after theReserve Bank said the inflation outlook provided some scope for further monetary easing. South Africa’s rand strengthened for a second day against the U.S. currency amid demand for higher-yielding assets.

“The market is giving back some of its recent moves, with the yen weakening,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The performance of the U.S. economy and Fed policy direction will be important for the yen.”

The yen fell 0.4 percent to 99.90 per dollar at 7:09 a.m. New York time after depreciating to 100.42. It appreciated to 98.87 yesterday, the strongest since May 9. Japan’s currency declined 0.5 percent to 130.85 per euro after gaining 1 percent during the previous two days. The euro was little changed at $1.3091.

Japan’s currency will weaken toward 110 per dollar over the next 12 months, Bank of Tokyo-Mitsubishi’s Hardman said.

The MSCI Asia Pacific Index of shares gained 1.1 percent and the Stoxx Europe 600 Index advanced 0.3 percent.

Fed Stimulus…”

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“Australia’s dollar and government bond yields climbed amid signs that a slowdown in China is bottoming out, easing concern demand for commodities will decrease in Asia’s biggest economy.

The Aussie gained against all of its 16 major peers after official Chinese data over the weekend showed manufacturing accelerated and as a technical indicator signaled a recent decline in the currency was overdone. Local 10-year bond yields rose before a Reserve Bank of Australia policy meeting tomorrow, when the central bank will probably keep the benchmark rate at a record-low 2.75 percent, economists forecast.

The manufacturing report published June 1 was “the first seemingly positive bit of economic news that we’d had from China for some time,” said Ray Attrill, the global co-head of currency strategy at National Australia Bank Ltd. in Sydney. “There’s a chance that we can push a little bit higher,” he said, referring to the Aussie.

Australia’s dollar added 0.8 percent to 96.49 U.S. cents as of 4:36 p.m. in Sydney after posting a 7.7 percent tumble in May, the biggest monthly slump since September 2011. New Zealand’s dollar rose 0.4 percent to 79.75 U.S. cents following a 7.2 percent decline last month.

The 14-day relative-strength index for the Aussie against the U.S. dollar slid to as low as 19.5 last month, a level unseen since May 2010, and was at 25.5 on May 31. Readings below 30 indicate an asset’s price has fallen too rapidly and is set for a rebound.

Chinese Economy

The Purchasing Managers’ Index of Chinese manufacturing advanced to 50.8 in May from 50.6 the prior month, the National Bureau of Statistics and China Federation of Logistics and Purchasing said on June 1. Economists in a Bloomberg News survey had forecast 50, which marks the dividing line between expansion and contraction….”

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“Australia’s dollar fell to the lowest since October 2011 versus its U.S. peer after the 10-year yield spread between the two countries’ debt narrowed to the least in more than four years on signs the American economy is improving.

Local bonds fell, with the 10-year rate climbing to a 2-month high, after U.S. Treasury benchmark yields rose to the most since April 2012. The Aussie weakened to a more-than four-year low against its New Zealand counterpart. Pacific Investment Management Co., which runs the world’s biggest bond fund, said it expects further interest rate cuts by the Reserve Bank of Australia as mining investment cools.

“The diminishing yield differential is one argument for the Aussie’s move lower,” said Michael Turner, a debt strategist at Royal Bank of Canada in Sydney. “There certainly seems to be some downside risk to growth in Australia. The risk is skewed for more easing by the RBA.”

The Australian dollar touched 95.36 U.S. cents, the weakest since October 2011, before trading at 95.38 at 3:53 p.m. in Sydney, 0.8 percent below yesterday’s close. It fell 0.6 percent to NZ$1.1840 after earlier dropping to NZ$1.1837, the lowest since January 2009. The Aussie weakened 0.8 percent to 97.78 yen. New Zealand’s dollar slid 0.2 percent to 80.57 U.S. cents and lost 0.3 percent to 82.45 yen.

Australia’s 10-year bond yield rose 15 basis points or 0.15 percentage point to 3.47 percent, after touching 3.5 percent, the highest since March 27. The U.S. Treasury 10-year yield rose to 2.23 percent today, a level unseen since April 2012. The spread between the two narrowed to 116 basis points yesterday, the least since November 2008.

U.S Economy….”

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“The Dollar Index rose for a second day before U.S. data tomorrow on first-quarter growth amid speculation the Federal Reserve will curb monetary stimulus.

The Australian dollar fell to the weakest level since October 2011 after the International Monetary Fund cut its growth forecast for China. A gauge of Asian currencies touched an almost eight-month low on concern investors will repatriate funds from emerging markets back to the U.S.

“The dollar is strong,” said Marito Ueda, the senior managing director at FX Prime Corp. (8711), a currency-margin company in Tokyo. “The U.S. economy is steadily recovering, and a reduction in monetary easing appears to be coming into view.”

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six major U.S. trading partners, added 0.3 percent to 84.349 at 6:50 a.m. inLondon. It reached 84.498 on May 23, the most since July 2010.

The dollar was little changed at $1.2845 per euro after rising 0.6 percent yesterday. The yen traded at 131.57 per euro from 131.59 and was little changed at 102.42 per dollar. The Aussie fell 0.8 percent to 95.40 U.S. cents, after dropping to 95.36, the weakest since Oct. 5, 2011.

The U.S. Commerce Department is likely to say tomorrow the world’s biggest economy grew at an annualized 2.5 percent pace in the first quarter, according to the median forecast of economists surveyed by Bloomberg News. It would be unchanged from the preliminary reading released last month.

U.S. Growth

U.S. real gross domestic product will probably expand 2 percent this year, compared with a 0.5 percent contraction in the euro region, a separate poll of economists shows. Japan’s economy is estimated to grow 1.4 percent…..”

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“Australia’s dollar traded 0.6 percent from the lowest level since 2011 before U.S. data forecast to show improvements in consumer confidence and manufacturing amid speculation theFederal Reserve may slow stimulus.

The Aussie’s one-month volatility versus the greenback was near the highest since June. The currency rebounded against the yen, snapping a four-day slide, as technical indicators signaled recent losses were excessive. Chairman Ben S. Bernanke said last week the Fed may slow quantitative easing if there are signs of sustained economic growth. Demand for the Australia and New Zealand currencies was limited on prospects slowing Chinese output will curb the South Pacific nations’ exports.

“It would be interesting to see whether the expectations will continue for the Fed to wind down QE,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “There’s a bit of uncertainty about China. Chinese data this week could increase the chance of the RBA cutting sooner rather than later. I wouldn’t rule out Aussie falling further,” Chan said, referring to the Reserve Bank of Australia.

The Australian dollar was little changed at 96.40 U.S. cents as of 3:10 p.m. in Sydney from 96.34 yesterday. It reached 95.82 on June 1, the lowest since October 2011. The currency’s one-month implied volatility was at 11.160 percent from 11.255 percent yesterday, when it reached 11.375, the highest since June 26…..”

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“The dollar rose against most of its major peers before U.S. data today that economists say will show consumer confidence improved and home prices gained.

The Dollar Index climbed amid prospects improving U.S. fundamentals will prompt the Federal Reserve to taper its monthly bond purchases of $85 billion. The yen snapped a three-day advance versus the euro as Asian stocks rose and after the Bank of Japan estimated a key component of funds in the nation’s economy reached a record amid unprecedented stimulus.

“This is an unsustainable pace of Fed purchases, and we have to accept that’s not good monetary policy, so I think tapering does start in the fourth quarter this year,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. (WBC) in Sydney, referring to a reduction in U.S. monetary stimulus. “On a medium-term basis, the dollar is a buy.”

The greenback jumped 1 percent to 101.97 yen as of 6:37 a.m. in London from yesterday and added 0.1 percent to $1.2923 per euro. The yen slid 0.9 percent to 131.78 per euro.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six major U.S. trading partners, added 0.1 percent to 83.799. Markets in the U.S. and U.K. were closed yesterday for public holidays….”

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