BLBG:Yen Rises After BOJ; Dollar Index Reaches 20-Month High
The yen climbed against all of its 16 major peers after the Bank of Japan (8301) refrained from adding monetary stimulus that debases the currency.
The yen gained for the first time in three days after the central bank left its asset-purchase fund unchanged, as was forecast by all economists in a Bloomberg News survey. The Dollar Index touched the highest in 20 months as elections loom in Greece on June 17 that may determine whether the nation stays in the euro currency bloc. The Australian dollar slid to this year’s low as Asian stocks dropped, sapping demand for higher- yielding currencies.
“There were people who were positioned on a decline in the yen in case the BOJ added to monetary easing,” said Etsuko Yamashita, chief economist in Tokyo at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-biggest banking group by market value. “They have to close these positions because the BOJ took no action.”
The yen rose 0.5 percent to 79.54 per dollar at 6:59 a.m. in London from the close in New York yesterday. It gained 0.6 percent to 100.83 per euro. The euro fell 0.1 percent to $1.2676 after touching $1.2642 on May 18, the least since Jan. 16.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, reached 81.830, the highest since September 2010, before easing to 81.633.
Half of the 14 economists in the Bloomberg survey anticipate the BOJ will add stimulus by July, when its price forecasts will indicate any progress in countering decade-long deflation. The central bank expanded its asset-purchase program in February and April.
‘Risks Ahead’
The euro earlier declined by as much as 0.3 percent as European Union leaders prepare to meet today and Greece heads for new elections after an inconclusive vote this month.
“It’s hard to see what will come out of the EU meeting that would stimulate markets any more,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “We have election risks ahead of us for Greece and its potential exit from the euro zone, and that’s what markets are dwelling on and that will support the U.S. dollar as a safe haven for the next few weeks.”
Dow Jones reported that former Greek Prime Minister Lucas Papademos said while it’s unlikely the nation will leave the euro, it’s still a risk. CNBC quoted Papademos as saying that no preparations for a departure are under way in Greece.
The Australian dollar fell as low as 97.42 U.S. cents, the weakest since Nov. 28, before trading at 97.76, 0.3 percent below yesterday’s close.
The MSCI Asia Pacific Index (MXAP) of shares retreated 1.7 percent.
Fibonacci Analysis
The euro may rebound to the highest level in almost three weeks against the yen, according to Bank of America Merrill Lynch, citing trading patterns.
“In the short term, the euro has scope to strengthen beyond the 105 yen level, near the 50 percent retracement from its high in March,” said Tomoko Fujii, a Tokyo-based senior foreign-exchange strategist at Bank of America. She cited Fibonacci analysis, which holds that prices rise or fall by certain percentages after reaching a high or low.
The 50 percent Fibonacci retracement of the euro’s decline from its March 21 high of 111.44 yen to the low of 100.21 yen on May 18 is at 105.82, according to data compiled by Bloomberg. That would be the strongest level since May 3.
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
