Yen Climbs as China’s Yuan Fix Surprises Market, Spurs Haven Bid

The yen gained as the weakest daily fix for the Chinese yuan in six weeks drove investors to Japan’s currency as a haven, while the pound led declines among its developed-nation peers.

The yen also climbed versus the dollar, rallying from a decline Monday, as Japan’s Topix equity index erased gains. Options traders are close to the most bullish on the yen since 2011, pricing on six-month contracts show. The People’s Bank of China lowered the daily reference rate for the yuan by 0.17 percent, the most in six weeks. The fix was lower than most models were expecting, said Sue Trinh, the head of Asia foreign-exchange strategy at Royal Bank of Canada.

“It seems to be a direct policy signal to weaken the yuan, at least for today, and that is seeing dollar-yen leading the way lower and cross-yen selling off as well,” Hong Kong-based Trinh said. “If today’s fix is the start of a trend, then it would be consistent with our view that China needs a more flexible exchange rate and, in other words, a weaker exchange rate.”

The yen climbed 0.6 percent to 112.20 per dollar as of 12:03 p.m. in Tokyo, following a 0.3 percent decline Monday. Traders are paying 2.59 percentage points more for options to buy the yen over six months, than for contracts to sell, close to the 2.68 percentage-point level reached Monday, which was the most since March 2011.

The pound fell 0.9 percent to 158.34 yen and slid 0.3 percent to $1.4113.

Bloomberg