The yen and dollar weakened as Spanish borrowing costs declined at a bond auction and German lawmakers approved the euro area's bailout of Cyprus, damping demand for safer currencies.
The yen dropped against most of its 16 major counterparts as gains in European shares and U.S. stock futures lured investors to higher-yielding assets. The Australian dollar rose against all of its 16 most-traded counterparts.
"We've seen a tentative recovery in risk sentiment following another big sell-off this week," Joe Manimbo, a market analyst at Western Union Business Solutions, a unit of Western Union Co., said in an interview yesterday in New York. "That's caused investors to grab some of the recently beaten- down currencies on the cheap. The fundamental backdrop for the global economy remains relatively positive."
The yen dropped 0.5 percent to 128.47 per euro at 8:19 a.m. New York time after appreciating 0.5 percent yesterday. The dollar declined 0.1 percent to $1.3047 per euro after climbing to $1.3002 yesterday, the strongest since April 8. Japan's currency weakened 0.4 percent to 98.47 per dollar.
Spain's Treasury sold 4.7 billion euros of bonds due between 2016 and 2023, surpassing its maximum target of 4.5 billion euros. The 10-year securities were sold at an average yield of 4.612, down from 4.898 percent at the previous auction on March 21. The five-year yields declined to 3.257 percent from 3.557 percent.
Germany's lower house backed the country's participation in the 10 billion-euro bailout of Cyprus as Finance Minister Wolfgang Schaeuble said refusing aid risked triggering a default and contagion to other nations.
"Spain went well, and the German vote in favor for Cyprus was significant," said Neil Jones, head of hedge fund sales at Mizuho Corporate Bank Ltd. in London. "Risk appetite is slowly but surely coming back into the market" and pushing the dollar and yen lower, he said.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, fell 0.1 percent to 82.589 after dropping to 81.716 on April 16, the lowest since Feb. 28.
The U.S. Labor Department will say today applications for jobless benefits climbed to 350,000 last week from 346,000 in the previous period, according to a Bloomberg News survey. A separate report is forecast to show an index of leading indicators rose at a slower pace in March than the prior month.
South Africa's rand advanced 0.1 percent to 9.1637 per dollar and the Aussie dollar gained 0.3 percent to $1.0323. South Africa's benchmark interest rate of 5 percent and Australia's 3 percent, compares with close to zero in the U.S. and Japan.
The Stoxx Europe 600 Index of shares rose 0.5 percent and futures on the Standard & Poor's 500 Index expiring in June climbed 0.4 percent.
The pound fell earlier against the euro after the Office for National Statistics said U.K. retail sales including fuel dropped 0.7 percent from February when they climbed 2.1 percent.
"The weak data this week suggests it's likely the Bank of England will add more stimulus to the economy," said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in London. "Although a lot of bad news has been priced in, we think the pound will probably remain under pressure, especially against the dollar, given its fundamentals."
Sterling dropped as much as 0.3 percent 85.74 pence per euro before trading little changed at 85.52 pence. It depreciated to 86.37 pence yesterday, the weakest level since March 15. The U.K. currency rose 0.1 percent to $1.5260.
The Aussie is overvalued and Brazil's weak economy means it won't allow its currency to rise, according to Goldman Sachs Asset Management Chairman Jim O'Neill.
"The currency I find the most interesting is the Australian dollar," O'Neill said at a seminar in Tokyo. "The Australian dollar is significantly overvalued."