BLBG: Yen Falls, Set for 4th Weekly Loss Against Euro, as Stocks Rise
The yen fell against the dollar and headed for a fourth weekly decline versus the euro as a rally in stocks damped demand for the Japanese currency as a refuge.
The euro was poised for its biggest weekly gain versus the dollar this year after European Central Bank council member Yves Mersch said he doesn’t see deflation risks in the 16-nation region, tempering concern policy makers will cut interest rates. The Swiss franc was set for its largest weekly loss against the euro since 1999 after the Swiss National Bank yesterday cut the key rate close to zero and started selling the currency to stem its appreciation.
“We’ve seen stocks surge and normally the yen would be beyond 100 per dollar at the moment,” said Geoffrey Yu, a currency strategist in London at UBS AG. “Japanese policy makers want a weaker yen to help stimulate the economy.”
The yen dropped to 126.98 versus the euro as of 9:30 a.m. in London, from 126.16 in New York yesterday. The Japanese currency fell to 98.31 per dollar from 97.72. The dollar slipped to $1.2932 against the euro, from $1.2913. The yen may fall to 130 per euro and to 100 per dollar within a month, Yu said.
The Swiss franc declined to 1.5331 per euro from 1.5299 yesterday, when it had a record daily loss of 3.4 percent. The franc was 0.2 percent down at 1.1855 per dollar.
The yen fell as the Nikkei 225 Stock Average rose 5.2 percent after Japan’s Finance Minister Kaoru Yosano said Prime Minister Taro Aso is preparing a third spending plan, and China signaled additional measures to bolster its economy. The MSCI World Index of regional shares rallied 1.5 percent, up 8.5 percent for the week.
Most-Traded Currencies
The franc was the fourth-biggest decliner against the dollar today of the 16 most-traded currencies after the Swiss National Bank said yesterday it began buying currencies in its first solo intervention in foreign-exchange markets since 1992.
Switzerland’s central bank is “implementing this intention” to buy foreign currency to weaken the franc, spokesman Werner Abegg said when asked whether the SNB was already intervening. The SNB also halved the target lending rate to 0.25 percent, and said it will buy corporate bonds, a practice known as quantitative easing.
“This move by the SNB will have a knock-on effect to other markets,” analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, wrote in a research note yesterday. “Japan is in a similar position to Switzerland, with the economy contracting sharply.”
Quantitative Easing
The Japanese government confirmed yesterday that the economy contracted at the fastest pace since 1974 last quarter, as exports, output and business spending collapsed.
Japan is “likely to turn its attention to quantitative easing measures once again, with the yen likely to gain attention,” BNP Paribas analysts wrote. “The dollar-yen is now expected to test the 99.70 recent high and the 100 level,” they wrote.
Stocks rallied after Bank of America Corp. Chief Executive Officer Kenneth Lewis said yesterday the bank had a profit in January and February, joining JPMorgan Chase & Co. and Citigroup Inc. Sales at U.S. retailers in February fell less than forecast, the Commerce Department said yesterday.
“Risk appetite and sentiment has turned more optimistic this week as markets were able to look past bad news to focus on the good,” said Carl Rajoo, an economist at Forecast Singapore Pte. “News on the U.S. banks and the better-than-expected retail sales reinforce hopes that the economy may be bottoming. As a result, equities rallied and likewise Asian currencies.”
The South Korean won gained 0.9 percent today to 1,483.50 per dollar, extending this week’s advance to 4.4 percent, the most since the five days ended Dec. 19.
