The European Central Bank’s undercutting of the Bank of Japan with negative interest rates looks set to accelerate Japanese sales of German bunds, while falling short of the fund flows needed to weaken the yen.
Currency traders are rejecting warnings from International Monetary Fund Managing Director Christine Lagarde that volatility will increase as the Federal Reserve pares its unprecedented stimulus program.
The Thai baht headed for its biggest monthly decline since May and 10-year sovereign bonds dropped as overseas funds cut holdings of the nation’s assets amid concern political unrest will hurt economic growth.
Thailand’s central bank kept its key interest rate unchanged for a second straight meeting, resisting pressure from the government to resume easing as it guards against the risk of inflation amid rising wage and oil costs.
The euro climbed for the first time in three days versus the dollar as European stocks rose. Emerging-market currencies weakened and gold fell on the outlook for Federal Reserve stimulus and as a typhoon wreaked damage in the Philippines. U.S. shares rose to trade near a record.
Asian currencies rose, led by South Korea’s won and the Philippine peso, on optimism a combination of economic growth, increases in borrowing costs and tolerance for currency appreciation will spur fund inflows.