Yen, Dollar Advance on Haven Demand as Prospects Fade for U.S. Debt Accord

The yen and dollar strengthened as a Democratic Party aide said a U.S. congressional committee is likely to announce it failed to agree on deficit cuts, boosting demand for safer assets.

The euro extended last week’s loss against the yen, the biggest since September, after Spain’s Socialists became the fifth European government to be ejected amid the region’s debt crisis in elections over the weekend. The pound fell as a report showed U.K. home sellers cut asking prices by the most in a year this month, adding to signs the U.K. economic outlook is worsening. The Australian dollar declined to a five-week low against its U.S. counterpart.

“When you get these kind of moves in all the risk proxies and dollar-yen doesn’t do anything, that’s a fairly clear picture of there being general risk aversion,” said Adam Cole, global head of foreign-exchange strategy in London at Royal Bank of Canada’s RBC Capital Markets unit. The deficit talks are “hitting risk aversion generally. Even though the U.S. is the epicenter of this particular issue, its currency still trades as a safe haven,” he said.

The yen strengthened 0.5 percent to 103.50 per euro at 10:27 a.m. London time, adding to last week’s 2 percent gain. Japan’s currency was little changed at 76.92 against the dollar. The U.S. currency strengthened 0.6 percent to $1.3451 per euro.

The Stoxx Europe 600 Index of shares slipped for a third day, losing 2.1 percent while the Standard & Poor’s 500 Index of stock futures lost 1.5 percent. The MSCI Asia Pacific Index fell 1.3 percent.