BLBG:Yen Rallies as Japan Official Amari Comments on Currency
The yen rose the most since May versus the dollar as Japan’s economy minister Akira Amari said an excessively weak currency may affect imports and households, damping speculation policy makers will try to weaken it further.
The yen strengthened for the first time in five days against the greenback on bets the currency’s decline to the weakest level since June 2010 has been excessive. The Swiss franc fell to a 13-month low against the euro amid signs the European debt crisis is easing, reducing demand for the currency as a haven. South Africa’s rand declined after Anglo American Platinum Ltd. said it will idle shafts and cut output.
“The market is massively short yen because investors are convinced it will weaken further on the back of the government’s policy,” said Michael Derks, chief strategist at FxPro Financial Services Ltd. in London. “When positions are that extreme, a comment like that from Amari can really swing the market.” A short position is a bet an asset will decline.
The yen appreciated 1.3 percent to 88.34 per dollar as of 6:57 a.m. in New York, the biggest gain since May 17. It slid to 89.67 yesterday, the weakest level since June 25, 2010. Japan’s currency jumped 1.5 percent to 117.94 per euro. The dollar gained 0.3 percent to $1.3344 per euro.
Amari said Japan faces risks from any excessive decline in the yen, highlighting the limits on Prime Minister Shinzo Abe’s campaign to drive down the currency.
“If the yen excessively weakens, this would cause a spike in import prices,” Amari told reporters in Tokyo. “It would be a benefit for exports, but would have harmful effects on people’s livelihoods.”
Inflation Target
The Bank of Japan (8301) will review its 1 percent inflation goal at its next policy meeting on Jan. 21-22. The central bank will enact powerful monetary easing to help the weakening economy, Governor Masaaki Shirakawa said today at a meeting of BOJ branch managers. He is due to step down in April.
Goldman Sachs Asset Management Chairman Jim O’Neill said the Bank of Japan must show it is serious about inflation targeting for the yen to weaken further.
“We’ve travelled a long way since late November” and “classical indicators suggest it is oversold,” O’Neill said on Bloomberg Surveillance from London. The Bank of Japan “has got to show its going to take this 2 percent inflation target seriously. Rather than just a goal, it has to be a target.”
Yen’s Slump
The yen has slumped 16 percent in the past six months, the biggest decline among the 10 developed-market currencies tracked by Bloomberg Correlation Weighted Indexes as Abe was swept to power with a pledge to weaken the currency. The dollar dropped 4.9 percent and the euro gained 4.6 percent.
The franc dropped to the weakest since December 2011 against the euro amid speculation the region’s debt crisis is easing, sapping demand for the Swiss currency as a refuge.
European Central Bank President Mario Draghi said on Jan. 10 the euro-area economy will slowly return to health in 2013 as the region’s bond markets stabilize.
“The franc will underperform this year because the situation in the euro is looking more secure,” FxPro’s Derks said. “There will continue to be an unwinding of what were excessively short structural positions in the euro.”
The franc fell 0.1 percent to 1.2356 per euro after depreciating to 1.2386, the weakest since Dec. 15, 2011.
Rand Drops
The rand fell to the lowest in five weeks against the dollar after Anglo Platinum, the biggest producer of the metal, said it will reduce output, fuelling concern South Africa’s trade deficit will worsen.
Anglo Platinum intends to shut four shafts, putting 14,000 jobs at risk. Metals and other minerals accounted for 61 percent of South Africa’s exports in the first 11 months of 2012, according to government data. The trade deficit in the same period was 112.7 billion rand ($12.9 billion), more than six times bigger than a year earlier, putting pressure on the current account and undermining the rand.
“One of the key risks for the rand is the extended current-account deficit, and a large portion of that is related to raw material output,” said Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg. “The fact that we’re shutting down production will certainly affect our ability to contract that deficit.”
The rand fell 0.9 percent to 8.7707 per dollar after depreciating to 8.7722, the weakest level since Dec. 6.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
