Japanese and stock futures fell after Greece’s credit rating was cut two levels by Standard & Poor’s, pushing the yen higher amid waning confidence about the global economy. Australian futures were little changed.

American depositary receipts of Toyota Motor Corp. (7203), the world’s largest carmaker, and those of Sony Corp. (6758), Japan’s No. 1 electronics exporter, both declined 0.3 percent from the closing share price in Tokyo. ADRs of Foster’s Group Ltd. (FGL) , Australia’s biggest brewer lost 0.7 percent, while BHP Billiton Ltd. (BHP), the world’s biggest mining company, climbed 0.3 percent as commodity prices rebounded.

Futures on Japan’s Nikkei 225 (NKY) Stock Average expiring in June closed at 9,785 in Chicago yesterday, compared with 9,815 in Singapore. The futures were bid in the pre-market at 9,790 in Osaka, at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index were little changed at 4,761 today. New Zealand’s NZX 50 Index increased 0.2 percent in Wellington.

“The Greek’s debt rating cut will likely again boost concerns about the country’s deteriorating finance and the yen’s strength,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co.

Futures on the Standard & Poor’s 500 Index were little changed today. In New York, the index gained 0.5 percent to 1,346.29 yesterday, advancing for a second straight day, as commodity prices rebounded from the biggest weekly drop since 2008 and McDonald’s Corp., the world’s No. 1 restaurant chain, rallied after sales topped estimates.

Crude Oil

Crude oil for June delivery jumped 5.5 percent to settle at $102.55 a barrel yesterday in New York, the biggest one-day gain since Feb. 22. The London Metal Exchange Index of six metals including copper and aluminum advanced for a second day, rising 0.4 percent yesterday.

In Europe, Greece’s credit rating was cut two levels to B from BB- by Standard & Poor’s, which said further reductions are possible as the risk of default rises. Another cut would make Greece the lowest-rated country in Europe. Yesterday’s reduction, the fourth by S&P since April 2010, left it even with Belarus. Also, Moody’s Investors Service yesterday placed Greece’s B1 rating on review for a downgrade.

The euro fell against half its major counterparts after Standard & Poor’s cut Greece’s credit rating, renewing concern the region’s debt crisis is worsening.

Yen Rises

The yen appreciated to as high as 115.03 against the euro last night in Tokyo, compared with 115.97 at the close of stock trading yesterday. Against the dollar, Japan’s currency strengthened today to 80.19 from 80.63. A stronger yen reduces overseas income at Japanese companies when converted into their home currency.

The MSCI Asia Pacific Index fell less than 0.1 percent this year through yesterday, compared with gains of 7 percent by the S&P 500 and 1.7 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.5 times estimated earnings on average, compared with 13.6 times for the S&P 500 and 11.3 times for the Stoxx 600.

A Greek euro coin sits by a stack of euro coins. Photographer: Kostas Tsironis/Bloomberg

May 10 (Bloomberg) -- Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp., talks about global currencies. Cavenagh also discusses Europe's sovereign-debt crisis, and the outlook for Australia's federal budget. He speaks with John Dawson on Bloomberg Television's "First Up."(Source: Bloomberg)

The euro dropped to a six-week low versus the yen after Standard & Poor’s cut Greece’s credit rating, fueling concern Europe’s debt crisis is worsening. Asian gained after China reported record exports, while oil fell.

The euro weakened 0.4 percent to 114.99 yen as of 3:14 p.m. in Tokyo, while New Zealand’s dollar snapped a two-day gain versus the greenback. Japan’s 10-year bond yield was half a basis point off a four-month low. The MSCI Asia Pacific Index climbed 0.2 percent. Futures on the Standard & Poor’s 500 Index slid 0.2 percent and those on the Euro Stoxx 50 Index were little changed. Crude oil declined 1.2 percent in New York.

Greece is scheduled to sell 1.25 billion euros ($1.79 billion) of bills today after S&P cut the nation’s credit rating by two levels yesterday, the fourth downgrade since April 2010. China joined South Korea, Taiwan and Malaysia in having reported record exports this month, while data tomorrow is forecast to show inflation eased in the world’s second-largest economy, as industrial production and retail sales climbed.

“Greece is a continuing source of irritation for the investment community,” said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management Ltd. in Sydney. “I don’t think Greece’s problems will derail the economic recovery, but it seems unable to meet its commitments and therefore constantly undermines the integrity of the euro.”

Europe’s 17-nation currency traded at $1.4286 from $1.4365 in New York yesterday, when it touched $1.4255, the weakest level since April 19. The dollar bought 80.50 yen, compared with 80.36 yen yesterday.

Greek Debt

Greece is selling 182-day bills after S&P cut the nation’s credit rating to B from BB-, saying that further reductions are possible. That marks the fourth reduction by S&P since April 2010, and another cut would make Greece the lowest-rated country in Europe. Greece’s 10-year note yield increased 21 basis points to 15.71 percent and the cost of insuring Greek debt for five years jumped to a record.

“The euro is obviously showing its vulnerability once again to the sovereign debt issue,” Jonathan Cavenagh, a currency strategist at Westpac Banking Corp., said in a Bloomberg Television interview in Singapore. “It can definitely fall further in the near term.”

Japan’s benchmark 10-year yield retreated one basis point to 1.13 percent amid increased demand for safer assets. Similar- maturity Treasuries were little changed, yielding 3.16 percent, as the U.S. prepared to sell $72 billion of debt this week and Pacific Investment Management Co. increased its bet against government-related securities in the world’s biggest economy.

Overvalued Kiwi

The New Zealand dollar fell 0.6 percent to 79.09 U.S. cents after the International Monetary Fund said it may be as much as 20 percent overvalued relative to estimates of the equilibrium exchange rate. The currency also weakened after the Treasury Department said the nation’s budget deficit was wider than forecast in the nine months through March.

Taiwan’s dollar advanced 0.6 percent to NT$28.569 versus its U.S. counterpart after government data showed exports increased 24.6 percent from a year earlier in April to a record $27.3 billion. Economists expected an 18 percent gain, based on the median estimate in a Bloomberg survey. The currency reached NT$28.508 on May 3, the strongest level since October 1997.

“Better-than-expected export figures supported the currency,” said Eric Hsing, a fixed-income trader at First Securities Inc. in Taipei. “Income from overseas will continue to drive up the Taiwan dollar.”

Chinese Exports

China’s exports increased 29.9 percent from a year earlier to $155.7 billion in April and the trade surplus was $11.4 billion, according to government data released today. The surplus was more than triple the median forecast of $3.2 billion in a Bloomberg survey of economists. Reports tomorrow are expected to show inflation eased to 5.2 percent from 5.4 percent in March, industrial production grew 14.6 percent and retail sales expanded 17.6 percent, separate polls show.

The biggest hurdle facing China’s economic rebalancing is reaching internal agreement that the country should rely less on exports and more on domestic consumption, Chinese Vice Premier Wang Qishan said in an interview on the “Charlie Rose” show. The remarks, in response to questions about when China may let the yuan rise and take other steps to shift its economy toward domestic demand, acknowledged debates within the Chinese government over the pace of gains.

About four shares gained for every three that fell on MSCI’s Asia Pacific Index. Japan’s Nikkei 225 Stock Average rose 0.3 percent. Australia’s S&P/ASX 200 Index slipped 0.6 percent before the nation’s budget is delivered to parliament today. China’s Shanghai Composite Index rose 0.2 percent after the release of the trade figures. Financial markets in Hong Kong and South Korea are closed for holidays.

Sumitomo Heavy, Toshiba

Sumitomo Heavy Industries Ltd. (6302) jumped 12 percent after the maker of heavy electric machinery beat its full-year net income forecast by 27 percent. Toshiba Corp. (6502), the world’s No. 2 maker of flash-memory chips, rallied 3.7 percent after it forecast profit will climb to a record this year.

U.S. stocks rose yesterday, driving the S&P 500 0.5 percent higher. Microsoft Corp. (MSFT), the world’s largest software marker, may be active today after two people familiar with the matter said the company is in talks to buy Skype Technologies SA to add Internet-calling tools.

Silver for July delivery advanced 1.2 percent to $37.565 an ounce, extending yesterday’s 5.2 percent gain. Futures slumped 27 percent last week after CME Group Inc., the owner of the Comex exchange, increased the cost of making new speculative positions by 84 percent in two weeks.

Oil for June delivery traded at $101.29 a barrel in electronic trading on the New York Mercantile Exchange, from $102.55 yesterday, before an Energy Department report tomorrow that’s forecast to show U.S. crude inventories increased for a third week. The contract jumped 5.5 percent yesterday, the most since Feb. 22, following a 15 percent weekly loss that was the biggest since December 2008.

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Yuan forwards were poised for a weekly loss on speculation slides in commodities prices will deter China, the world’s No. 1 importer of copper, cotton and soybeans, from allowing faster appreciation to damp inflation.

The contracts also weakened as a Purchasing Managers’ Index indicated manufacturing is cooling, fanning speculation policy makers will resist yuan gains that may hurt exports. The Standard & Poor’s GSCI Index of commodities has lost 9.3 percent so far this week, poised for its biggest loss since December 2008. Inflation reached a 32-month high of 5.4 percent in March and is expected to peak before June, Fan Gang, a former academic adviser to the People’s Bank of China, said yesterday.

“Investors are reassessing the degree China would need to appreciate its currency to contain imported inflation,” said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong. “The PMI data was softer and if the government is confident that inflation will peak soon, we may not see the currency gaining as much as it did in April. Recent commodity- price declines could also ease China’s inflationary pressure.”

Twelve-month non-deliverable forwards dropped 0.6 percent this week to 6.3455 per dollar as of 11:04 a.m. in Hong Kong. The contracts reflected bets the yuan will strengthen 2.4 percent from the spot rate of 6.4959, according to data compiled by Bloomberg. The yuan slid 0.08 percent in Shanghai, ending a run of seven weekly gains that drove the currency to a 17-year high of 6.4892 on April 29, according to the China Foreign Exchange Trade System.

PBOC Policy

In Hong Kong’s offshore market, the yuan fell 0.29 percent this week to 6.4785 per dollar. The People’s Bank of China set the yuan’s reference rate 0.03 percent stronger today at 6.5003 per dollar, before U.S.-China economic talks next week. The fixing was 6.4990 on April 29, the strongest level since July 2005.

Exchange-rate policies aren’t likely to change “dramatically in the foreseeable future,” Fan said in an e-mail to Bloomberg News late yesterday. China’s monetary policy may shift to “less tightening” in the second half of this year after inflation likely peaked in April or this month, he said.

The price of crude oil dropped 12 percent this week as U.S. services and employment data indicated the world’s biggest economy is slowing. China is the second-largest importer of the fuel and, according to the China Petroleum & Chemical Industry Association, bought 54 percent of the crude it used in 2010.

U.S.-China Talks

U.S. officials will press their Chinese counterparts at a meeting next week to let the yuan strengthen more rapidly, a Treasury Department official said yesterday. Treasury Secretary Timothy F. Geithner and Secretary of State Hillary Clinton will meet with Chinese officials including Vice Premier Wang Qishan and State Councilor Dai Bingguo on May 9 and 10 in Washington. Federal Reserve Chairman Ben S. Bernanke and People’s Bank of China Governor Zhou Xiaochuan will also participate.

Geithner has reiterated this week ahead of the meetings the Obama administration’s position that China should let the yuan strengthen. Some U.S. lawmakers say China’s currency policy gives the nation’s exporters an unfair competitive advantage.

The yuan will appreciate 3.1 percent to 6.30 per dollar by the end of this year, leading gains among Asia’s 10 most-used currencies, according to the median estimates in Bloomberg surveys of analysts.

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The Philippine peso and government bonds fell after a report showed inflation accelerated in April, prompting the central bank to raise borrowing costs.

Consumer prices increased 4.5 percent from a year earlier, after a 4.3 percent gain in March. The median estimate in a Bloomberg News survey of 16 economists was for a 4.4 percent gain. That matched the rate in April 2010, which was the fastest in a year. The local benchmark stock index fell by the most in seven weeks after economic data from the U.S. raised concern growth is faltering in the world’s largest economy.

“The market may be pricing in uncertainty on inflation,” said Lito Biacora, vice president for treasury at Bank of the Philippine Islands in Manila. “The weakness in the U.S. economy and the correction in the equities market” are driving the peso lower, he said.

The peso weakened 0.2 percent to 42.94 per dollar as of the 4 p.m. close in Manila, according to prices from inter-dealer broker Tullett Prebon Plc. The currency touched 42.640 on May 2, the strongest level since Nov. 5.

Bangko Sentral ng Pilipinas raised its benchmark rate by a quarter of a percentage point to 4.50 percent shortly after 4 p.m. in Manila, as predicted by 12 of 16 economists surveyed by Bloomberg. Three expected no change and one forecast a half a percentage point rise.

U.S. service industries expanded in April at the slowest pace in eight months, the Institute for Supply Management’s index of non-manufacturing companies showed yesterday. U.S. companies also added fewer jobs than forecast, ADP Employer Services said yesterday.

Philippine five-year bonds declined for a second day. The yield on the 7 percent note due January 2016 increased five basis points, or 0.05 percentage point, to 5.10 percent, according to Tradition Financial Services. The yield was at 5.18 percent at 4:04 p.m. in Manila, shortly before the central bank announced its rate decision.

Via - www.bloomberg.com

Japanese bonds rose the most in seven weeks as stocks slumped before a U.S. report that economists said will show job growth slowed in April.

Ten-year yields declined to a four-month low as Japan’s markets reopened after three holidays amid concern a stronger yen will hurt exporters and derail the economic recovery. The extra yield offered by 10-year Treasuries over similar-maturity Japanese bonds shrank to the narrowest this year, increasing the allure of yen-denominated debt.

“We’ll enter a period of pessimism about the U.S. economy for the next six months, and the job report will signal its beginning,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp., which manages the equivalent of $875 billion in deposits. “Yields are likely to remain low.”

The 10-year yield fell six basis points to 1.14 percent as of 3:28 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1.3 percent security due March 2021 added 0.537 yen to 101.418 yen. The yield fell the most since March 15 to the lowest since Jan. 5.

Five-year yields declined 3.5 basis points to 0.42 percent. Ten-year futures for June delivery jumped 0.65 to 140.75 at the afternoon close on the Tokyo Stock Exchange. The Nikkei 225 (NKY) Stock Average slumped 1.5 percent.

Japan’s bonds with a maturity of between one and 10 years have returned 0.1 percent this year, according to an index compiled by Bank of America Merrill Lynch. That compares with a 3.6 percent drop in the Nikkei 225.

‘Flow of Funds’

“Risk aversion is causing a flow of funds to bonds,” said Kazuya Ito, a fund manager in Tokyo at Daiwa SB Investments Ltd., which manages the equivalent of $57 billion.

U.S. employers added 185,000 workers in April after hiring 216,000 the previous month, according to a Bloomberg News survey of economists before today’s Labor Department report.

The difference in yield between 10-year Treasuries and similar-dated Japanese bonds shrank to 1.94 percentage points yesterday, the narrowest since Dec. 9. Treasury yields dropped yesterday as a report showed the number of Americans filing for jobless benefits rose last week to the most since August.

The yen appreciated to 79.57 per dollar yesterday, rising beyond 80 for the first time since March 18, the day after it touched a postwar record of 76.25. A stronger local currency reduces the value of overseas sales at Japanese exporters when repatriated. The yen traded at 80.54 today.

Increased Bets

Bonds also rose amid speculation the Bank of Japan will ease monetary policy further to bolster the nation’s recovery from its record earthquake in March.

Kazuhiko Sano, chief strategist at Tokai Tokyo Securities Co., said it was increasingly likely the central bank will buy more assets after Deputy Governor Kiyohiko Nishimura proposed expanding the asset-purchase program last month. The measure was voted down by the other eight members.

“For 10-year yields to fall below 1 percent, additional monetary easing, namely increased buying of government bonds, is necessary,” Sano wrote today in a report. “Before the April 28 policy meeting, I saw a chance of about 50 percent for such a measure,” and the odds are now 70 to 80 percent, he said.

Via - www.bloomberg.com

The pound fell versus the euro before a report that is forecast to show producer-price inflation slowed in April even as Bank of England policy makers keep borrowing costs at record lows.

Sterling was little changed against the dollar. The Office for National Statistics will say producer-price index output prices rose 0.7 percent from March, when they gained 0.9 percent, according to the median estimate of 12 economists compiled by Bloomberg News. The Bank of England yesterday kept its benchmark interest rate at a record low 0.5 percent as weak economic data suggested the economy isn’t yet strong enough to withstand a withdrawal of monetary stimulus.

The pound weakened 0.2 percent to 88.92 pence per euro as of 7:29 a.m. in London. It was little changed at $1.6393 from $1.6389 yesterday and climbed 0.7 percent to 132.08 yen.

Britain’s currency strengthened as much as 1.4 percent against the euro yesterday, the steepest intraday climb since Oct. 26, after the European Central Bank left its key rate unchanged at 1.25 percent and signaled it may not raise the main refinancing rate again until after June after increasing it in April. The move followed an earlier slide in the pound to a 13- month low against the shared European currency.

The decision by U.K. monetary policy makers to leave lending rates unchanged follows reports this past week that showed house prices declined for the first time in three months in April while a gauge of construction growth unexpectedly dropped to a four-month low. A service industries measure also fell more-than-estimated last month.

An April 12 report showed U.K. inflation unexpectedly slowed to 4 percent in March, following five months of acceleration to a more than two-year high of 4.4 percent in February.

Via - www.bloomberg.com

May 5 (Bloomberg) -- Bob Parker, a senior adviser at Credit Suisse Asset Management, talks about the outlook for the dollar and global economic growth. He speaks with Francine Lacqua on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

The yen fell from a seven-week high on speculation Japan will intervene to curb recent gains that may hurt the overseas competitiveness of the nation’s exporters.

Japan’s currency also weakened versus the euro on prospects investors took advantage of the yen’s advance to a five-week high to sell it. The Australian dollar surged after the nation’s central bank said it will likely need to raise interest rates “at some point.” The Dollar Index slid from near the strongest in a week before a U.S. report economists said will show job growth slowed in April.

“There’s wariness over possible intervention, given the yen’s gains,” said Daisaku Ueno, president of Gaitame.com Research Institute in Tokyo, a unit of Japan’s largest currency margin company. “The yen is being sold.”

The yen dropped to 80.52 per dollar as of 6:50 a.m. in London from 80.07 in New York yesterday, when it reached 79.57, the highest level since March 18. The currency fell 0.7 percent to 117.27 per euro, the sharpest drop since April 27. It climbed to 116.15 yesterday, the highest since March 29.

The dollar weakened to $1.4565 per euro from $1.4539. The greenback is still headed for its first weekly advance in three versus Europe’s currency, having risen 1.6 percent.

Japan’s currency strengthened beyond 80 per dollar yesterday for the first time since Group of Seven nations intervened in markets on March 18 to weaken the yen. The currency had surged to a postwar high of 76.25 the previous day, amid speculation Japanese investors would repatriate assets to pay for reconstruction from a record earthquake and a deadly tsunami on March 11.

Yen’s Gains

Chief Cabinet Secretary Yukio Edano and Finance MinisterYoshihiko Noda said today Japan will closely watch the foreign- exchange market, while Economic and Fiscal Policy Minister Kaoru Yosano said the yen’s volatile movements are troublesome. A stronger yen reduces the value of overseas income at Japanese companies when converted into their home currency. Markets in Tokyo reopened today after three holidays.

The dollar declined before data today that may show the U.S. job market’s recovery is losing momentum. U.S. employers added 185,000 jobs in April after an increase of 216,000 positions in the previous month, according to the median forecast of economists in a Bloomberg News survey before the Labor Department’s report.

“We’re forecasting U.S. non-farm payrolls of 165,000 in April, below market consensus for 185,000,” said Tohru Sasaki, head of Japan rates and foreign-exchange research at JPMorgan Chase & Co. in Tokyo. “Should this data be weak as we expect, the dollar-yen will likely decline and break 80 again on the back of falling stocks and U.S. yields.”

Stocks, Treasuries

The Nikkei 225 (NKY) Stock Average lost 1.4 percent, while the MSCI Asia Pacific Index of regional shares dipped 1 percent today. Ten-year Treasury yields slipped seven basis points to 3.15 percent yesterday.

The Dollar Index, which tracks the dollar against the currencies of six major U.S. trading partners, slid 0.1 percent to 74.041 from yesterday, when it touched 74.225, the highest since April 26.

The Australian dollar climbed against all its major counterparts after the Reserve Bank said higher interest rates may be needed to contain inflation.

The outlook “suggests that further tightening of monetary policy is likely to be required at some point for inflation to remain consistent” with a goal of 2 percent to 3 percent in the medium term, the central bank said.

The so-called Aussie jumped 1.2 percent to $1.0703, and gained 1.7 percent to 86.17 yen.

The euro strengthened by as much as 0.3 percent against the dollar as economists surveyed by Bloomberg News said Germany’s industrial output rose 0.5 percent in March, after a 1.6 percent increase the prior month. The Economy Ministry in Berlin releases the data today.

‘Very Closely’

The European Central Bank left its benchmark interest rate at 1.25 percent yesterday. President Jean-Claude Trichet signaled the central bank will wait until after June to lift borrowing costs again. The ECB will monitor inflation risks “very closely,” Trichet said at a press conference. Inflation accelerated to 2.8 percent last month and economic growth has gathered momentum.

“The ECB is still likely to raise rates, albeit at a gradual pace,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “This will probably be a positive for the euro versus the dollar and the yen.”

The ECB will boost its benchmark rate by 76 basis points in the next 12 months, according to a Credit Suisse Group AG index based on swaps.

Via - www.bloomberg.com

May 4 (Bloomberg) -- Thomas Kressin, head of the European foreign exchange desk at Pimco Europe Ltd., comments on the outlook for the euro in an interview with Bloomberg's Anchalee Worrachate in London yesterday. (Source: Bloomberg)

Pacific Investment Management Co., which runs the world’s biggest mutual fund, said it’s betting the euro will fall because its current strength doesn’t adequately reflect the risk that the union may disintegrate.

The fund is buying currencies of countries that have strong growth, low levels of debt, and where central banks are tightening monetary policy, such as Australia, Singapore, South Korea and Sweden, Thomas Kressin, head of European foreign exchange at Pimco in Munich, said in an interview yesterday.

“The euro is overvalued,” he said in London. “Investors should, and will eventually, demand higher premiums to compensate for political and economic risks which are structurally embedded in the institutional setup of the euro area. That’s why we expect the trade-weighted euro exchange rate to depreciate from here.”

Bloomberg Correlation-Weighted Indexes showed the euro has risen 3.9 percent in the past three months, making it the best performer after the Swiss franc among the 10 currencies tracked by the measure. The 17-nation currency has gained even as the currency bloc grapples with a sovereign debt crisis that forced Greece, Ireland and Portugal to seek bailouts from the European Union and the International Monetary Fund.

Kressin said Pimco has been bearish on the dollar, the yen and the euro in the past few years and it preferred currencies from emerging economies, especially in Asia. South Korea will grow 4.5 percent this year while the U.S. economy expands 2.9 percent and the euro region 1.7 percent, according to median economist estimates compiled by Bloomberg News.

“Given growth and rising inflationary pressures we’ve seen in the emerging markets, currencies have become an additional tool for policy makers there to reduce the pressure,” Kressin said. “In the developed markets, the same criteria applies. That’s why we find the Australian dollar, the Norwegian krone and the Swedish krona attractive.”

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