BS: Yen Drops to Four-Month Low Versus Dollar; Rand Climbs
The yen slid to its weakest level in four months against the dollar as investors speculated the Bank of Japan (8301) will expand monetary stimulus next week.
Japan’s currency fell versus all of its 16 most-traded peers as the Nikkei newspaper reported the BOJ will consider boosting its asset-purchase program. The pound jumped versus the euro as Britain emerged from its recession more strongly than economists forecast. South Africa’s rand rallied as the nation got a new budget that for the first time since 1998 didn’t raise three-year spending targets.
“We’re seeing yen weakness today because there is this expectation of easing from the BOJ,” said Eimear Daly, a currency market analyst at Monex Europe Ltd. in London. “Any kind of upbeat news out of the world economy effects dollar-yen and euro-yen. It’s like flicking a switch on and off, and we’re risk-on.”
The yen fell 0.3 percent to 80.02 per dollar at 11:42 a.m. New York time and reached 80.34, the weakest since June 25. It was little changed at 103.57 per euro. The 17-nation currency lost 0.2 percent to $1.2948 after rising 0.4 percent earlier. It reached $1.2921 yesterday, the weakest level since Oct. 15.
The dollar pared losses against major counterparts as risk appetite ebbed and U.S. stocks trimmed gains. The Standard & Poor’s 500 Index was up less than 0.1 percent after rising as much as 0.9 percent earlier amid better-than-estimated financial results from companies including Procter & Gamble Co., the world’s largest consumer-products maker, and Aetna Inc., the third-biggest U.S. health insurer.
Corporate Results
Sweden’s krona depreciated as much as 0.4 percent to 8.7040 per euro, after strengthening earlier to 8.6317. It weakened 0.3 percent to 6.7008 per dollar after gaining to 6.6398. Sweden’s benchmark repo rate was kept at 1.25 percent, the Riksbank said in a statement today. The move was predicted by 16 of the 19 economists surveyed by Bloomberg.
“It’s now more probable that the repo rate will be cut rather than being raised during the winter,” the central 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.”
Mexico’s peso rose for the first time in three days after a report showed higher-than-forecast durable-goods orders in the U.S., the country’s biggest trade partner. The peso gained 0.2 percent to 12.9692 per dollar. Durable-goods orders increased 9.9 percent last month, the data showed. Claims for U.S. jobless benefits fell, the Labor Department reported.
Rand Climbs
South Africa’s rand rallied 0.5 percent to 8.7364 per dollar after Finance Minister Pravin Gordhan announced a budget designed to restrain spending over the next three years to help restore confidence in Africa’s largest economy.
The finance chief ordered government departments to cut back on wasteful expenditure as rising debt levels put the nation under increased scrutiny from rating companies following the first downgrades since the end of apartheid.
The BOJ will release a forecast for Japan’s consumer prices and growth on Oct. 30, when it holds its second policy meeting this month.
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.
Nikkei said the BOJ may increase its asset-purchase target by 10 trillion yen ($125 billion) to 90 trillion yen.
Yen Outlook
The yen may strengthen to 78 per dollar this year before weakening to 85 yen in the following 12 months on expectations of easier monetary policy and a strengthening U.S. economic recovery, Lee Hardman, a currency strategist at Bank of Tokyo- Mitsubishi UFJ Ltd. in London said. The forecast is line with the median of 55 analyst predictions compiled by Bloomberg.
The yen weakened 2.7 percent in the past month, the biggest decline among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro climbed 1.1 percent and the dollar appreciated 0.6 percent.
Sterling added 0.6 percent to $1.6128 and was 0.7 percent stronger at 80.33 pence per euro.
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.
Sterling is meeting resistance at $1.6130, Kathleen Brooks, research director in London at Forex.com, a unit of online currency-trading company Gain Capital Holdings Inc. (GCAP), wrote in a client note today. Resistance refers to an area on a price graph where technical analysts anticipate sell orders to be clustered.
Still, “the better GDP combined with a benign economic environment may cause the pound to extend gains to $1.6200 and even $1.6260 in the next week or so,” Brooks wrote.
To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
