BLBG:Yen Weakens After G-20 Refrains From Censuring Japan
The yen fell, extending losses that have made it the worst-performing major currency in the past three months, after Group-of-20 nations refrained from criticizing Japanese policies driving the decline.
Japan’s currency approached the weakest since May 2010 against the dollar as Morgan Stanley said 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 may resume. The pound fell to a seven-month low against the dollar after Bank of England policy maker Martin Weale said exports may benefit from its decline.
“There’s renewed selling pressure on the yen and it’s a reaction to the G-20 statement,” said Adam Myers, head of foreign-exchange strategy at Credit Agricole Corporate & Investment Bank in London. “Everyone has woken up to the realization that the G-20 couldn’t criticize Japan when many other countries are manipulating their own currency.”
The yen fell 0.5 percent to 93.99 per dollar at 11:21 a.m. London time after depreciating to 94.46 on Feb. 11, the weakest level since May 5, 2010. Japan’s currency dropped 0.4 percent to 125.46 per euro after sliding 0.7 percent on Feb. 15. The euro was little changed at $1.3347.
The yen has tumbled 13 percent versus the dollar in the past three months as Prime Minister Shinzo Abe announced spending increases and pressured the Bank of Japan to boost monetary easing. The decline is the most of 16 major currencies tracked by Bloomberg versus the greenback.
U.S. financial markets will be shut today for the Presidents’ Day holiday.
Moscow Talks
The yen weakened after G-20 finance ministers and central bankers ended two days of talks in Moscow on Feb. 16 with a statement pledging not to “target our exchange rates for competitive purposes,” without singling out Japan.
Japanese officials said they haven’t deliberately sought to weaken their currency and its decline was a byproduct of efforts to revive the economy. U.S. Treasury Undersecretary Lael Brainard criticized “loose talk about currencies.”
“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,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. “We’ll see the Japanese continue to pursue aggressive fiscal easing and monetary easing, and just not talk about the currency so much.”
Main Focus
The main focus for the yen now is on who will be appointed to replace BOJ Governor Masaaki Shirakawa, who will step down on March 19, Morgan Stanley analysts led by Hans Redeker in London, wrote in the note to clients 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 and he wants to show the government’s intentions through nominees for BOJ governor and deputies soon. Standard & Poor’s today retained its negative outlook on Japan’s AA- credit rating, pending policy developments of Abe’s administration.
The South Korean won dropped for the first time in a week as the yen’s decline fueled speculation the country will step in to weaken its currency to protect exporters.
The won fell 0.4 percent to 1,082.10 per dollar at the close of trading in Seoul.
Pound Declines
The pound weakened against 13 of its 16 major counterparts as futures traders reversed bets the currency will strengthen.
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 -- so-called net shorts -- was 16,776 on Feb. 12, compared with net longs of 1,174 a week earlier.
“It may be that high levels of uncertainty and a reluctance to take on new risks have stood in the way of exporters seeking new markets and domestic producers doing what is needed to displace imports,” Weale said in a Feb. 16 speech in Coventry, England. “Provided the calmer atmosphere we have seen since the summer is sustained, we may see further benefits of the depreciation.”
The pound fell 0.3 percent to $1.5473 after dropping to $1.5438, the weakest since July 13.
Sterling has tumbled 4.6 percent this year, the second- worst performer after the yen among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 0.8 percent and the euro rose 2.1 percent.
To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net
