Yen Falls to 3-Week Low as Failed Turkey Coup Cuts Haven Demand

(Bloomberg) -- The yen dropped as global markets showed resilience in the wake of the failed coup attempt in Turkey, sparking a selloff in haven assets.

Japan’s currency, which often appreciates during market turmoil, fell as much as 1.3 percent versus the dollar on Monday, reaching its lowest level in three weeks. The yen depreciated against all except one of its 31 major peers. Riskier currencies including the lira and the South African rand led gains, after the attempt to unseat President Recep Tayyip Erdogan was thwarted.

"The markets have woken up and are still trying to digest the failed coup in Turkey -- things have started to settle down,” said Daragh Maher, head of U.S. currency strategy at HSBC Holdings Plc. “When people saw the news that it was a failed coup attempt, the yen weakened.”

The decline added to the’s yen 4.1 percent tumble last week, as Japanese Prime Minister Shinzo Abe’s victory in upper house elections fueled speculation the country would intensify its efforts to fight deflation. Options that were said to be considered included a policy of known as helicopter money, such as direct financing of government spending by the central bank.

Japan’s currency depreciated 1.2 percent to 106.11 per dollar at 12:22 p.m. New York time. The lira strengthened 1.4 percent to 2.9725 per dollar, after sliding 4.6 percent on July 15.

Japan’s Chief Cabinet Secretary Yoshihide Suga in an interview ruled out the issuance of deficit bonds to fund an economic stimulus package planned for the autumn, hinting at the use of construction debt for longer-term investments.

Investors seem to have “decided that Turkey’s failed coup was a domestic affair which will blow over quite fast,” Kit Juckes, a London-based global strategist at Societe Generale SA, wrote in a note to clients. While Turkey’s dependence on foreign funding means gains by the lira “can’t go that much further,” the “broader market implications are limited,” he said.

--With assistance from Lilian Karunungan Lukanyo Mnyanda and Narayanan Somasundaram To contact the reporters on this story: Rebecca Spalding in New York at rspalding@bloomberg.net, Andrea Wong in New York at awong268@bloomberg.net. To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net, Paul Cox, Michael Aneiro