BLBG:Yen Rallies After BOJ Delays Open-Ended Asset Buying Until 2014
The yen rallied from near its weakest level in more than 2 1/2 years after the Bank of Japan (8301) said it will conduct open-ended asset purchases from next year, disappointing investors who expected bolder action now.
Japan’s currency advanced against most of its major counterparts after the BOJ said it will buy about 13 trillion yen ($146 billion) in assets per month from January 2014 and set a 2 percent inflation target. The euro gained, halting a two-day drop, ahead of German data forecast to show an improvement in economic sentiment.
“Overall, the size of the program has not been raised as hoped. That is risking disappointment and causing a downward correction in dollar-yen,” said Greg Gibbs, a Singapore-based senior currency strategist at Royal Bank of Scotland Group Plc. “The BOJ statement disappoints on the pace of purchases in 2013, which has been maintained.”
The yen gained 0.4 percent to 89.23 per dollar at 6:15 a.m. in London, after earlier weakening as much as 0.6 percent. It touched 90.25 yesterday, the lowest since June 23, 2010. Japan’s currency strengthened 0.2 percent to 119.08 per euro. The euro gained 0.3 percent to $1.3348.
Prime Minister Shinzo Abe’s drive for looser monetary policy and a weaker yen may put the central bank’s independence at risk and increase tensions with trading partners, according to European Central Bank governing council member Jens Weidmann. In a speech in Frankfurt yesterday, Weidmann warned against “politicizing” the yen exchange rate and interfering in monetary policy.
Meets Expectations
Japan’s currency has tumbled 12 percent in the past three months, the biggest decline among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
“The announcement of a 2 percent inflation target and the open-ended asset purchases met the market’s expectations,” said Yunosuke Ikeda, the head of foreign-exchange strategy at Nomura Securities International in Tokyo. “The market may not be quite satisfied as there wasn’t any additional policy easing in 2013.”
Demand for the euro was bolstered ahead of German data forecast to show an improvement in economic sentiment. The ZEW Center for European Economic Research in Mannheim will probably say today its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 12 this month, the highest since April, according to the median estimate of economists surveyed by Bloomberg. That compares with a reading of 6.9 in December.
Euro Support
“European macroeconomic expectations will return to the spotlight today with the release of the German ZEW,” Adam Myers, the European head of foreign-exchange strategy at Credit Agricole SA (ACA) in London, wrote in a note to clients. Expectations for improved growth will “provide support” for the euro, he wrote.
In the U.S., sales of existing homes probably climbed 1.2 percent to a 5.1 million annual rate last month, the strongest since November 2009, according to the median estimate of economists polled by Bloomberg before the National Association of Realtors publishes the figures today. Another report this week may say new-home sales picked up to a 385,000 annual pace, the best showing since April 2010.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, slid 0.3 percent to 79.818. It reached 80.187 on Jan. 18, the highest since Jan. 10.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
