BLBG:Yen Weakens After G-20 Refrains From Censuring Japan
The yen fell against the dollar, extending losses that made it the worst-performing major currency in the past three months, after Group-of-20 nations refrained from censuring Japanese policies driving the decline.
The final G-20 communique released in Moscow fell short of last week’s Group-of-Seven statement and means recent trends in major currencies are set to resume, according to Morgan Stanley. The pound slid toward a seven-month low on prospects the Bank of England will tolerate faster inflation. The euro weakened as Italy’s general election looms.
“There was a risk that they might have fired a warning shot at Japan,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-biggest bank by market value. “They didn’t do so and that’s helped a rise in dollar- yen.”
The yen tumbled 0.5 percent to 93.96 per dollar as of 6:51 a.m. in London from the close on Feb. 15. It touched 94.46 on Feb. 11, the weakest since May 2010. The Japanese currency dropped 0.4 percent to 125.42 per euro. The 17-nation euro fell 0.1 percent to $1.3348.
The MSCI Asia Pacific Index of shares rose 0.7 percent. U.S. financial markets will be shut today for a holiday.
The yen has tumbled 13 percent in the past three months as Prime Minister Shinzo Abe announced spending increases and pressured Japan’s central bank to boost monetary easing. The decline is the most of 16 major currencies tracked by Bloomberg versus the greenback.
No Constraint
Two days of talks between G-20 finance ministers and central bankers ended in Moscow Feb. 16 with a statement pledging not to “target our exchange rates for competitive purposes,” without singling out Japan.
Japanese officials denied driving down their currency, saying its decline was a byproduct of efforts to revive the economy. U.S. Treasury Undersecretary Lael Brainard criticized “loose talk about currencies,” in a speech in Moscow.
“They basically said that the Japanese can continue to pursue their policies to reflate their economy, which the G-20 and the G-7 have called for, for a couple of years now,” Marc Chandler, the global head of currency strategy at Brown Brothers Harriman & Co. in New York, said in a phone interview Feb. 17. “We’ll see the Japanese continue to pursue aggressive fiscal easing and monetary easing, and just not talk about the currency so much.”
Shirakawa Successor
The main focus for the yen now is on who will be appointed to replace Bank of Japan Governor Masaaki Shirakawa, who intends to step down on March 19, Morgan Stanley analysts led by Hans Redeker in London, wrote in the note published Feb. 16.
Abe is likely to nominate Asian Development Bank President Haruhiko Kuroda, who is set to pursue the government’s anti- deflation course, though if he nominates former BOJ deputy governor Toshiro Muto, that may trigger the yen to retrace losses back to 90 per dollar, Morgan Stanley said.
Abe said in parliament in Tokyo today that the purpose of monetary easing is to end deflation. He wants to show the government’s intentions through nominees for BOJ governor and deputies soon, he said. Standard & Poor’s today retained its negative outlook on Japan’s AA- credit rating, pending policy developments of Abe’s administration, it said in a statement.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the pound compared with those on a gain was 16,776 on Feb. 12, figures from the Washington-based Commodity Futures Trading Commission showed. That’s the most for so-called net shorts since June and was a reversal from net longs of 1,174 a week earlier.
U.K. Inflation
The Bank of England will release minutes of this month’s policy meeting on Feb. 20. The central bank left the target of its bond purchases unchanged on Feb. 7, saying inflation is likely to accelerate further in the near term and may stay above the BOE’s 2 percent target for the next two years.
The BOE is “giving up on inflation targeting,” Mansoor Mohi-uddin, head of foreign-exchange strategy in Singapore at UBS AG, wrote in an emailed note on Feb. 16. “The pound seems clearly at risk of following the yen and suffering the next large-scale devaluation for a major currency.”
The pound fell 0.2 percent to $1.5493. It touched $1.5462 on Feb. 15, the weakest since July 25.
The euro declined for a fourth day against the dollar ahead of Italy’s parliamentary election on Feb. 24-25.
Billionaire former prime minister Silvio Berlusconi kicks off the week with a rally today in Milan. Berlusconi had 27.8 percent support in an SWG Institute survey published Feb. 8, compared with 33.8 percent for Pier Luigi Bersani, Berlusconi’s main rival.
‘Next Risk’
“The next risk event is Italy’s general election,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “Should the voting result in an administration that reverses austerity, it will spur risk-off moves in financial markets.”
The U.S. currency’s “critical resistance” against the Singapore dollar remains at S$1.2465, the 38.2 percent retracement on its Fibonacci chart from a June high to an October low, Quek Ser Leang and Jimmy Koh, analysts in Singapore at United Overseas Bank Ltd., wrote in a research note today. The risk appears to be “greater on the downside” as long as this level isn’t taken out, they wrote.
The greenback gained 0.2 percent to S$1.2394 today. Resistance refers to price levels where sell orders may be clustered.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net; Rocky Swift at rswift5@bloomberg.net
