BLBG:Yen Touches 13-Day Low on Election Risk; Euro Declines
The yen touched its weakest level in 13 days on prospects Japanese elections next month will hand power to the opposition party that advocates more aggressive monetary easing.
Japan’s currency sank 1.1 percent yesterday on speculation the election will favor Shinzo Abe, who today called for unlimited easing by the Bank of Japan. (8301) The 17-nation euro slid versus most peers before a report forecast to show the currency bloc’s economy shrank a second quarter. The Aussie held a one- day decline as the Reserve Bank increased sales of the local currency last month. The Dollar Index (DXY) was near a two-month high as tensions in the Gaza Strip spurred demand for haven assets.
“The yen is being sold against the dollar on speculation the elections will lead to a change in administrations and Abe will ask the BOJ for more easing,” said Yuki Sakasai, a currency strategist at Barclays Plc in New York.
The yen fetched 80.54 per dollar as of 1:25 p.m. in Tokyo, after earlier touching 80.59, the weakest since Nov. 2. It was at 102.58 per euro from 102.20. Europe’s shared currency was little changed at $1.2749 after rising 0.3 percent yesterday. The so-called Aussie dollar lost as much as 0.3 percent before trading at $1.0382 from $1.0376 yesterday.
Japanese Prime Minister Yoshihiko Noda said yesterday he will dissolve parliament, triggering an election that polls show his ruling Democratic Party of Japan will lose. The vote for the lower house will be held Dec. 16, acting DPJ secretary-general Jun Azumi said last night.
Higher Target
A victory for the opposition Liberal Democratic Party would reinstateAbe as premier. Abe has called for the BOJ to expand easing and aim for an inflation target of 3 percent.
In the euro area, advance estimates due today will probably show gross domestic product fell 0.1 percent in the three months through September from the previous period, according to the median forecast of economists in a Bloomberg News survey. That follows a 0.2 percent drop in the second quarter and would lead to the first technical recession since 2009.
“The slowdown in the European economy is being seen as a selling catalyst for the euro,” said Takuya Kawabata, an analyst at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin company. “Europe’s debt crisis is casting a shadow over the economy.”
Australia’s currency weakened versus all but two of its major peers after a Reserve Bank report on foreign-exchange transactions. The RBA sold A$483 million ($501 million) more Australian currency than it bought in October through the so- called other outright transactions category, which can include foreign central banks. That’s the most since June 2009, the data showed.
Budget Talks
Demand for the Aussie was also tempered as Asian stocks declined ahead of U.S. President Barack Obama’s budget discussions with congressional leaders tomorrow on ways to avoid the fiscal cliff, a collection of tax hikes and spending cuts that may push the world’s biggest economy into a recession next year.
A number of Federal Reserve officials said the central bank may need to expand its monthly purchases of bonds after the expiration next month of a program swapping about $45 billion of short-term Treasuries on its balance sheet for longer-term debt, minutes of its Oct. 23-24 meeting showed yesterday. Policy makers voted last month to keep buying $40 billion in mortgage bonds per month to spur the job market.
San Francisco Fed President John Williams said the central bank will probably continue buying debt well into the second half of next year to bring down U.S. unemployment now at 7.9 percent.
Gaza Strike
Investors also curbed bids for higher-yielding assets and sought safety amid increasing geopolitical tensions. Israeli jets struck the Gaza Strip, killing the leader of Hamas’s military wing and pushing the conflict to its harshest level since the military buildup that preceded Israel’s pre-New Year’s ground invasion of 2008.
“All of this is not conducive to a positive environment for risk assets,” Mitul Kotecha, Hong Kong-based head of global currency strategy at Credit Agricole SA (ACA), wrote in an e-mailed note to clients today. “The U.S. dollar remains supported against this background.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, was little changed at 81.091 today after touching a two-month high at 81.241 on Nov. 13. The MSCI Asia- Pacific Index (MXAP) of shares fell 0.2 percent.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
