BLBG:Yen Drops Versus Peers as Stocks Rally Damps Haven Demand
The yen declined versus all of its major peers as Asian stocks rebounded from yesterday’s biggest drop in more than seven months, damping demand for haven assets.
The currency weakened for the first time in four days against the dollar before a change of leadership at the Bank of Japan (8301) takes effect tomorrow amid expectations for expanded monetary easing. The euro slid toward the lowest level this year after CNBC reported that Cyprus’s government will not approve a bank-deposit levy to help fund the nation’s bailout. New Zealand’s dollar fell after Finance Minister Bill English called the currency overvalued.
“The market is taking the situation in Cyprus as not something that should affect broad risk sentiment, but as something specific to the euro area,” said Bill Diviney, a Tokyo-based currency strategist at Barclays Plc. “Reduced risk aversion tends to weigh on the yen.”
The yen fell 0.2 percent to 95.45 per dollar as of 6:14 a.m. in London. It weakened 0.1 percent to 123.47 per euro from yesterday, when it touched 121.15, the highest level since March 5. The euro slid 0.2 percent to $1.2936 from yesterday, when it dropped as much as 1.5 percent to $1.2882, the least since Dec. 10.
The MSCI Asia Pacific Index (MXAP) of stocks rose 0.4 percent, rebounding from a 1.9 percent drop yesterday, when Cyprus concerns sparked a $500 billion global equity rout.
Former European Central Bank Executive Board member Lorenzo Bini Smaghi said today the type of bailout used in Cyprus was unique and wouldn’t be applied to other nations needing international aid.
‘Unique’ Bailout
“Other countries are not in the same situation of a huge amount of bank balance sheets compared to GDP,” Bini Smaghi said in an interview with Bloomberg Television’s Susan Li, referring to gross domestic product. “There’s no reason for doing that in other countries, but certainly people get afraid,” he said of the plan to tax bank accounts.
Euro-area finance ministers said yesterday Cyprus must raise 5.8 billion euros ($7.5 billion), even as they signaled flexibility in applying the levy to small-scale savers.
“Cypriot authorities will introduce more progressivity in the one-off levy compared to what was agreed on 16 March,” the group said in a statement yesterday from its chairman, Dutch Finance Minister Jeroen Dijsselbloem.
A vote on the tax in the Cypriot parliament was delayed for a second day until today. The country’s banks will remain shut until March 21, a government official said. CNBC cited the Cypriot government as saying parliament will not approve the levy.
‘Aggressive Easing’
In Japan, central bank governor Masaaki Shirakawa steps down today, making way for Haruhiko Kuroda, who has pledged to do whatever it takes to rekindle inflation.
Expectations for additional stimulus have pushed the yen down 17 percent over the past six months, according to Bloomberg Correlation-Weighted Indexes which track 10 developed-nation currencies. The dollar has gained 3.4 percent, while the euro has advanced 2.4 percent.
“The government is aggressively pushing Japan out of deflation and that’s resulted in currency weakness,” said Calvin Tse, a Hong Kong-based currency strategist at Morgan Stanley. “One catalyst will be at the beginning of April, when we see the first meeting of Governor Kuroda and his new BOJ where they’re expected to engage in much more aggressive BOJ easing.”
New Zealand’s dollar declined as much as 0.3 percent to 82.42 U.S. cents, before trading 0.3 percent lower at 82.47, after Finance Minister Bill English said in an interview with Bloomberg News that the currency was overvalued, and may correct when the U.S. economy picks up.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
