The yen advanced against 14 of its 16 major counterparts as renewed speculation Europe?s debt crisis is worsening boosted appetite for safer assets.
The yen extended a gain from Tuesday versus the euro on concern Greek Prime Minister George Papandreou?s pledge to put the European Union?s financing package to a referendum risks a disorderly default if voters reject it. Japan?s currency rebounded from declines earlier this week, when the government intervened to weaken it, strengthening today as Asian stocks fell. The 17-nation euro erased an earlier drop against the dollar as Greece?s Cabinet backed Papandreou.
?The majority of the European nations may have the desire to resolve and try to fix things, but this is not going to be a quick fix,? said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland, New Zealand. ?Despite the fact that there has been a significant amount of the Bank of Japan intervention, I would probably be selling euro and buying Japanese yen.?
The yen gained 0.2 percent to 107.16 per euro as of 1:51 p.m. in Tokyo. The Japanese currency rose 0.3 percent to 78.14 per dollar after tumbling as much as 4.6 percent on Oct. 31, when Japan sold the currency. The euro was at $1.3718 from $1.3703 after earlier losing as much as 0.5 percent.
The MSCI Asia Pacific Index of stocks slid 1.1 percent.
The euro pared an earlier drop versus the dollar after a Greek official told reporters that the Cabinet gave Papandreou unanimous backing for his referendum plans. Government spokesman Elias Mosialos said the referendum will be held ?as soon as possible.? A vote of confidence in Parliament is also scheduled to begin on Wednesday and to conclude at the week?s end.
Papandreou will travel to Cannes, France Wednesday to brief German Chancellor Angela Merkel, French President Nicolas Sarkozy, European Central Bank President Mario Draghi and other officials on developments in Greece. Group of 20 leaders will meet in Cannes Thursday to discuss the debt crisis.
Bank of Japan board member Sayuri Shirai said developments in Europe need to be watched because they may cause the yen to appreciate further. Central bank deposits suggest the government sold approximately 8 trillion yen ($102.4 billion) on Oct. 31 after the currency rose to a post-World War II high of 75.35 per dollar, said Yuichi Takahashi, a market economist at Totan Research Co. in Tokyo.
Japan?s Prime Minister Yoshihiko Noda said in parliament he?s watching the foreign-exchange market closely.
Demand for the euro was limited before a report on Wednesday that may signal a slowdown in the region?s economy, spurring speculation the ECB may cut interest rates.
A manufacturing gauge based on a survey of purchasing managers in the 17-nation euro region probably fell to 47.3 last month from 48.5 in September, according to the median estimate in a Bloomberg News survey. That would be in line with an Oct. 24 initial estimate. A reading below 50 indicates contraction.
Six of 54 economists said in a separate survey that the ECB will on Thursday lower its key interest rate by at least 25 basis points, or 0.25 percentage point, from the current rate of 1.5 percent. A Credit Suisse Group AG index based on swaps shows traders are betting the ECB will cut its benchmark by 36.3 basis points over the next 12 months.
?They have to cut? interest rates, said ANZ?s Sinton. ?At this meeting, it?s probably likely to be a quarter percentage point cut. There is a wall of worry around what?s happening in Europe, and it?s not going to be a very short-term road out of that.?
The dollar slid against 11 of its 16 major peers as economic reports this week may show the U.S. recovery is faltering, adding to speculation Federal Reserve policy makers will signal their willingness to embark on more asset purchases, or quantitative easing, as they conclude a two-day meeting on Wednesday.
Poor U.S. data ?would contribute to risk aversion, which could be dollar supportive, but I think probably the more significant reaction would be the markets will see the data as a trigger for more QE,? said Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB. ?On that basis, I think the only safe haven will be the yen, and the dollar will end up coming under some pressure.?
Figures on Thursday may show factory orders in September declined 0.2 percent after dropping by the same amount in August, economists said in a Bloomberg survey.
The Institute for Supply Management?s factory index dropped to 50.8 last month from 51.6 in September, according to a report yesterday. The median forecast of economists was 52, with 50 being the dividing line between growth and contraction.
Fed Vice Chairman Janet Yellen and Chicago Fed President Charles Evans said in speeches last month that more action may be needed to reduce an unemployment rate stuck around 9 percent or higher for 30 months. Governor Daniel Tarullo said the Fed should consider buying housing debt to lower mortgage rates and spur growth.