BLBG: Yen May Fall to 100 Per Dollar as Fed Outpaces BOJ, Yasuda Says
By Nobuyuki Akama
March 18 (Bloomberg) -- The yen may fall to as low as 100 per dollar as the Federal Reserve raises interest rates faster than the Bank of Japan, according to Yasuda Asset Management Co.
The Fed may increase its benchmark as early as the fourth quarter while higher rates in Japan are still some time away, said Osamu Koizumi, who helps oversee the equivalent of $7.5 billion as chief investment officer at Yasuda in Tokyo. Japan’s currency is poised to decline as higher yields in the U.S. lure away investors, he said.
“Since it will take a considerable time for Japan to see a rate hike, the widening Japan-U.S. interest-rate gap is likely lead to a weaker yen,” Koizumi said. “As the spread widens, the dollar may target 95 yen, and eventually even 100 may be on the horizon.”
Japan’s currency traded at 90.19 per dollar as of 11:54 a.m. in Tokyo, having strengthened 3.1 percent this year. The yen last traded weaker than 100 per dollar in April 2009.
The extra yield offered by 10-year Treasuries over similar- maturity Japanese debt is likely to expand from the current 2.28 percentage points, Koizumi said, without giving a forecast. The 10-year Treasury yielded 3.64 percent today and Japan’s benchmark 10-year bond yielded 1.36 percent.
U.S. policy makers meeting March 16 repeated their pledge to keep the benchmark rate near zero for an “extended period,” while saying the world’s largest economy has “continued to strengthen.” The Bank of Japan yesterday doubled a lending program aimed at fighting deflation and held the overnight lending rate at 0.1 percent.
Ten-year Treasury yields are likely to start rising before a rate increase and they “may break above the key 4 percent level and even climb to as high as 4.5 percent toward year- end,” he said.
The BOJ will not begin to increase rates until the latter half of the fiscal year starting April as deflation persists, Koizumi said. Japan’s 10-year yields will remain in a range between 1.20 percent to 1.50 percent during the year starting April, he said.
To contact the reporter on this story: Nobuyuki Akama at akam@bloomberg.net.
