BLBG:Yen Weakens to Four-Month Low on BOJ Bets as Pound Rises
The yen dropped to its weakest level in four months against the dollar as investors speculated that the Bank of Japan (8301) will expand monetary stimulus next week.
The yen snapped a two-day gain versus the euro after the Nikkei newspaper reported the BOJ will consider increasing its asset-purchase program, debasing the currency. The pound rose to its strongest level in a week against the dollar as Britain emerged from its recession more strongly than economists predicted. The krona erased gains versus the euro after Sweden’s Riksbank kept benchmark interest rates unchanged and said further easing has become more probable as growth slowed.
“The market has been anticipating further BOJ easing,” said Lee Hardman, a currency strategist at Bank of Tokyo- Mitsubishi UFJ Ltd. in London. “That’s still the main driver of the yen weakness that we’ve seen.”
The yen fell 0.4 percent to 80.14 per dollar at 11:14 a.m. London time, after touching 80.21, the weakest level since June 25. It dropped 0.7 percent to 104.21 per euro. The 17-nation currency added 0.2 percent to $1.3004. It reached $1.2921 yesterday, the weakest level since Oct. 15.
The Nikkei 225 Stock Average (NKY) of Japanese shares rallied 1.1 percent today, contributing to a 0.5 percent gain by the MSCI Asia Pacific Index. The Stoxx Europe 600 Index rose 0.5 percent, a second day of gains.
The BOJ will release its forecast for Japan’s consumer prices and growth on Oct. 30 when it holds its second policy meeting this month.
BOJ Meeting
Economy Minister Seiji Maehara, who has been calling for more action from the central bank, said earlier this week he may attend the meeting. He was present at the central bank’s previous gathering, the first minister to do so for more than nine years.
The Nikkei report said the central bank may increase its asset-purchase target by 10 trillion yen to 90 trillion yen. Japan’s currency rose 0.6 percent versus the dollar on Sept. 19 when the BOJ last expanded stimulus, boosting the size of the program by 10 trillion yen.
The yen may strengthen to 78 per dollar this year before weakening to 85 yen in the next 12 months on expectations of easier monetary policy and a strengthening U.S. recovery, Hardman said
The yen weakened 2.9 percent in the past month, the biggest decline among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro climbed 1.2 percent and the dollar appreciated 0.3 percent.
Sterling added 0.6 percent to $1.6127 and was 0.3 percent stronger at 80.64 pence against the euro.
U.K. Growth
U.K. gross domestic product rose 1 percent from the three months through June, the fastest expansion in five years, the Office for National Statistics said in London today. That exceeded the highest estimate in a Bloomberg News survey for growth of 0.8 percent. The median forecast of 33 economists was 0.6 percent.
Sweden’s repo rate was kept at 1.25 percent, the Stockholm- based bank said in a statement today. The move was predicted by 16 of the 19 economists surveyed by Bloomberg, while the remainder forecast a cut to 1 percent. The bank lowered its forecast for the gauge to an average 1.2 percent in the fourth quarter, down from a 1.3 percent estimate in September.
“It’s now more probable that the repo rate will be cut rather than being raised during the winter,” the bank said. “Compared with the assessment in September, the repo rate is expected to be raised at a later stage and at a slower pace.”
The krona was little changed at 8.6812 per euro, after strengthening to 8.6317. It was 0.1 percent stronger at 6.6769 per dollar, after earlier appreciating by as much as 0.7 percent.
Kiwi Gains
New Zealand’s dollar rose to a two-week high after the central bank left interest rates unchanged and said market sentiment has improved.
Reserve Bank of New Zealand Governor Graeme Wheeler left the official cash rate at a record-low 2.5 percent.
“Wheeler disappointed those in the market who had been expecting an easing signal,” said Imre Speizer, a market strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “The market was fully priced for a January rate cut, and that pricing will be at least partially unwound.”
The so-called kiwi rose 0.2 percent to 82.23 U.S. cents, after touching 82.43 cents, the strongest since Oct. 5.
The dollar declined against all but two of its 16 major peers after the Federal Reserve said it plans to continue buying bonds to support the economy. The Fed said yesterday in a statement after a two-day policy meeting that the U.S. is still growing modestly and unemployment remains elevated.
Fed Purchases
The central bank will maintain $40 billion in monthly purchases of mortgage-backed securities while keeping a pledge to hold interest rates at virtually zero until at least mid-2015, it added. Its bond-buying program, known as quantitative easing, tends to debase the U.S. currency.
Reports today may show fewer Americans filed first-time claims for unemployment benefits last week while orders for U.S. durable goods rose in September, according to Bloomberg surveys of economists.
To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net;
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
