BLBG:Yen Falls Versus Peers on Bet BOJ Will Weaken Currency
The yen weakened against all 16 major peers on speculation the Bank of Japan (8301) will act to rein in the currency’s strength as it hurts exporters’ earnings.
The yen snapped a five-day advance versus the euro after Kyodo News reported the nation’s government will downgrade its monthly economic assessment, which is due Nov. 16, and as a rally in stocks curbed demand for safer assets. The euro rebounded from the lowest level in two months as a technical indicator signaled its recent decline may have been too rapid.
“The BOJ wants a weaker yen,” said Thomas Harr, head of Asia local markets strategy at Standard Chartered Plc Singapore. “They need to do some more to keep their momentum going.”
The yen fell 0.3 percent to 101.15 per euro as of 1:50 p.m. in Tokyo. The currency slid 0.2 percent to 79.50 per dollar. The euro rose 0.2 percent to $1.2723, after yesterday touching $1.2662, the weakest level since Sept. 7.
The 14-day relative strength index for the euro versus the dollar fell to 33.4 yesterday, near the 30 level that some traders see as a sign that an asset price may reverse course. A similar gauge for the single currency against the yen declined to 37.8.
The MSCI Asia Pacific Index added 0.2 percent, poised for its first advance in a week.
The BOJ increased its asset-purchase program by 11 trillion yen ($138 billion) to 66 trillion yen on Oct. 30, saying the central bank and the government will make “utmost” efforts to overcome deflation. Governor Masaaki Shirakawa and his board next meet on Nov. 19-20.
Economic Assessment
Kyodo reported the government will cut its economic assessment for a fourth consecutive month, citing people close to the matter. Data this week showed the nation’s gross domestic product contracted in the third quarter by the most since last year’s earthquake as exports slumped and consumer spending slid.
A stronger yen makes Japanese products costlier overseas, reducing the competitiveness of domestic exporters, while it cuts the value of income earned abroad when repatriated. The yen is 5.5 percent from its post-World War II record of 75.35 against the dollar reached Oct. 31, 2011.
“Pressure for the BOJ to add stimulus is expected to increase given the chance of recession and a possible political power shift ahead,” said Masakazu Sato, a Tokyo-based foreign- exchange adviser at Gaitame Online Co. “There surely are negative factors for the yen.”
Industrial Production
Gains in the euro were limited before data today forecast to show industrial production fell in the currency bloc, adding to signs that the region’s debt crisis is hampering growth.
Industrial output in the 17-member euro area declined 2 percent in September from August, when it increased 0.6 percent, according to the median estimate of economists in a Bloomberg News survey before the data release today.
“The euro will probably weaken over the rest of the week,” said Peter Dragicevich, a currency economist in Sydney at Commonwealth Bank of Australia (CBA), the nation’s largest lender. “The economic data in Europe is still continuing to deteriorate. The outlook for the economy still remains quite poor.”
The euro lost 6.3 percent in the past 12 months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen slid 2.3 percent and the dollar rose 1.2 percent.
In the U.S., President Barack Obama is due to meet with Republican and Democrat leaders on Nov. 16 for talks on how to reduce budget deficits and avert the $607 billion in automatic spending cuts and tax increases slated to take effect Jan. 1. The Congressional Budget Office has forecast that the fiscal cliff would push the economy into a recession next year.
Fisher Comments
The U.S. central bank can’t act as a substitute for Congressional actions, Dallas Fed President Richard Fisher said in an interview on CNBC yesterday. U.S. growth is “anemic,” said Fisher, who doesn’t vote on policy this year.
The policy-setting Federal Open Market Committee last month voted to continue buying $40 billion in mortgage debt per month until the employment outlook improves. The central bank bought $2.3 trillion of bonds in its previous two rounds of so-called quantitative easing from December 2008 and June 2011, when the Dollar Index (DXY) dropped about 14 percent.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, lost 0.1 percent to 81.019 today, after yesterday reaching 81.241, the most since Sept. 6.
To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
