GLOBAL MARKETS-Yen hits 4-1/2-year low vs dollar, oil and gold tumble

Fri May 10, 2013 1:40pm EDT

* Yen slides to 101.62 against dollar
    * Upbeat U.S. data, Japanese bond buys drive yen move
    * German Bunds fall as safe-haven demand dented
    * European shares hit five-year highs


    By Herbert Lash
    NEW YORK, May 10 (Reuters) - The yen slid to a 4-1/2-year
low against the dollar on Friday, triggering a sell-off in oil
and gold as well as safe-haven U.S. and German debt, after
recent signs of strength in the U.S. labor market added to
bullish sentiment on the dollar.
    Data on Japanese bond holdings showed that Japanese
investors were buying more foreign assets, and the collapse in
the yen reverberated throughout financial markets, which were
buffeted by often conflicting signals about how investors view
the economic outlook.
    the greenback rallied broadly as recent data showing
improvement in the U.S. jobs market sparked speculation the
Federal Reserve may scale back monetary easing.
    The firmer dollar pressured oil, as the strength of the
dollar makes commodities more expensive for holders of other
currencies. The fall in oil was intensified by rising supplies
and doubts over the strength of China's economy. 
    "There are two fundamental themes. The first is that despite
signs of slower U.S. growth here in the second quarter, the U.S.
 labor market continues to improve," Marc Chandler, head of
global currency strategy and Brown Brothers Harriman in New
York.
    "The second is the news reported in Tokyo ... that Japanese
investors turned buyers of foreign bonds," he said, calling it
an important signal for the yen bears, who were already selling
the Japanese currency on expectations that Japanese investors
will sell as the Bank of Japan's stimulus measures displace them
from the local bond market.
    The Japanese fell to 101.98 yen per dollar, the 
lowest since October 2008. The dollar was last at 101.62 yen, up
1.02 percent on the day.
    With the Japanese currency breaching the 100 level, analysts
expect the yen to fall further. Some see the dollar rising to
105 yen this summer and to 110 by the end of the year.
    Overnight data showed that Japanese investors had bought
309.9 billion yen ($3.1 billion) in foreign bonds in the week
through May 4 after purchasing 204.4 billion yen in the prior
week, according to the Ministry of Finance. 
    Equities in Europe closed higher, but Wall Street mostly
retreated after early gains and a measure of global equity
markets was lower. 
    German Bunds slid to their lowest level in over a month as
Bund futures, which hit a record high of 147.20 last
week, fell more than a point to a low of 144.43 and were on
course for their biggest one-week fall since March 10.
    Bund futures settled down 121 ticks at 144.66. 
    The benchmark 10-year U.S. Treasury note was
down 25/32 in price to yield 1.8982 percent.
    The slump in the Japanese currency was sparked by a drop in
weekly U.S. jobless claims data on Thursday, which added to
evidence of a rapidly improving employment market first seen in
last week's nonfarm payrolls report. 
    The move was given a further push by the data on Japanese
investors' foreign bond purchases. The data confirmed widespread
expectations that the Bank of Japan's aggressive stimulus plans
would result in a massive flight of money out of the country in
a search for higher-yielding investments.
    "We've had back-to-back good news in U.S. figures and you
have to wind the clock back six to eight weeks to find the last
time we had that," said Nick Parsons, head of market strategy at
 National Australia Bank.
    "Once we got through 100 (yen) and the Japanese bond buying
data came out, that added fuel to the fire," he said.
    The yen's move came as finance ministers and central bankers
of the Group of 7 countries gathered for a two-day meeting near
London, to discuss ways to stimulate growth, with currency
movements likely to be one of the main topics on the agenda.
 
    Wall Street stocks were mostly flat. A pair of strong
corporate earnings helped the Nasdaq register a small advance.
    Nvidia Corp and Priceline.com Inc led the
Nasdaq's rise a day reporting quarterly results. Both companies
beat profit expectations, even as Priceline gave a
second-quarter outlook that disappointed. 
 
    "We're getting more constructive on the second half of the
year as both the market and the economy are picking up," said
Terry DuFrene, investment specialist for JP Morgan Private Bank
in New Orleans.
    "While it has caught us by surprise how much markets have
come up, and we might see a decline of 5 percent, we don't see
any meaningful pullback ahead," DuFrene said.
    The Dow Jones industrial average was down 20.62
points, or 0.14 percent, at 15,062.00. The Standard & Poor's 500
Index was up 0.62 points, or 0.04 percent, at 1,627.29.
The Nasdaq Composite Index was up 15.45 points, or 0.45
percent, at 3,424.62. 
    MSCI's world equity index, which tracks
stocks in 45 countries, was down 0.29 percent but was on course
to end a third week of gains at a five-year high.
    The FTSEurofirst 300 index of leading European
shares closed up 0.35 percent at 1,233.49.
    
    Brent crude oil was on the verge of tumbling below
$102 a barrel, falling $1.87 to $102.60. U.S. crude eased
$1.77 to $94.62 a barrel.
    Spot gold fell as low as $1,420.60 an ounce.