BLBG:Yen Rises for Third Day Before Price Data; Aussie Drops
The yen rose for a third day, the longest run of gains in almost two months, on bets Japanese consumer price data this week will add to evidence that the central bank’s monetary stimulus is failing to stoke inflation.
Japan’s currency was supported as technical indicators signaled that its plunge to a 2 1/2 year low this week was too rapid. The Bank of Japan (8301) increased its price-gain target to 2 percent yesterday and announced open-ended asset purchases to start next year. It predicted inflation will accelerate to 0.9 percent in the fiscal year starting April 2014. The South African rand declined the most versus the dollar as a report showed inflation accelerated in December.
“It’s hard to sell the yen on hopes that inflation will rise,” said Junya Tanase, chief currency strategist at JPMorgan Chase & Co. in Tokyo. “The BOJ’s outlook for consumer prices was only slightly higher than previously forecast,” Tanase said in reference to the bank’s projection in October for a 0.8 percent gain in prices next fiscal year.
The yen appreciated 0.5 percent to 88.31 per dollar as of 8:45 a.m. London time. It has strengthened 2 percent over the past three days, its longest run of gains since the period ended Nov. 26. It reached 90.25 on Jan. 21, the weakest level since June 2010. The yen rose 0.6 percent to 117.52 per euro. Europe’s shared currency fell 0.1 percent to $1.3306.
Japan’s consumer prices excluding fresh food probably fell 0.2 percent in December from a year earlier, following a 0.1 percent drop the previous month, according to the median economist estimate in a Bloomberg News survey before the data due on Jan. 25. That would be the biggest decline since August.
‘Upward Correction’
The 14-day relative strength index for the yen versus the dollar was at 39 yesterday, near the 30 level that some traders see as a sign an asset has fallen too far, too fast and may be due to reverse course. Against the euro, it was at 38.
Japan’s currency has plunged about 8 percent against the greenback since Nov. 15 when Shinzo Abe called for unlimited monetary stimulus from the BOJ ahead of lower house elections that elevated him to prime minister. Amid pressure from Abe’s government, the BOJ yesterday doubled its inflation target.
“The yen currently is in an upward correction phase after it weakened rapidly in the past two months,” said Noriaki Murao, managing director of the marketing group in New York at Bank of Tokyo-Mitsubishi UFJ Ltd. “The market was somewhat disappointed in that no deadline has been set for the inflation target and that the open-ended asset purchases don’t start until 2014.”
Currency Indexes
The yen fell 5 percent in the past month, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 1.2 percent and the dollar added 0.2 percent.
The euro was 0.7 percent from its highest in almost 11 months ahead of data that economists predicted will show a slower contraction in manufacturing and services in the euro area. That would follow a report yesterday that showed German investor confidence climbed to a 2 1/2 year high.
A preliminary reading of a composite index based on a survey of purchasing managers in manufacturing and services will probably show a gain to 47.5 this month from 47.2 in December, according to the median estimate in a Bloomberg survey. A reading below 50 indicates contraction. Markit Economics will release the data tomorrow.
Growth Signs
“Sometime around the middle of the year, you should start to see stronger signs of growth in the European economy,” said Joseph Capurso, a Sydney-based currency strategist at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “Signs that the euro-zone recession is slowly easing will be positive for the euro.”
In a speech in Frankfurt late yesterday, European Central Bank President Mario Draghi said the “darkest clouds” over the euro area have receded due to decisive policy steps last year.
Goldman Sachs Group Inc. raised its euro forecasts to $1.40 over the next three to six months from previous estimates of $1.25 and $1.33, the bank said in a report yesterday.
The Australian dollar dropped after the statistics bureau said the country’s consumer price index rose 0.2 percent last quarter from the previous three months, trailing the 0.4 percent increase estimated by economists in a Bloomberg poll.
The British pound traded near the weakest since February versus the euro as Prime Minister David Cameron delivered a speech on the U.K.’s relationship with the European Union.
The so-called Aussie lost 0.1 percent to $1.0555. Sterling was little changed at 84.06 pence per euro after touching 84.41 yesterday, the weakest since Feb. 29. The rand fell 0.3 percent to 8.8844 per dollar, snapping two days of gains.
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
