BLBG:Yen Climbs as Kuroda Reiterates Policy Options; Euro Holds Loss
The yen gained against all its 16 major peers after Bank of Japan (8301) Governor Haruhiko Kuroda reiterated policy easing options, damping expectations for novel measures to be unveiled as early as next week.
Kuroda spoke to upper house lawmakers today after telling Japan’s lower house earlier this week he aimed to achieve a 2 percent annual inflation goal in two years. The euro traded 0.4 percent from a four-month low versus the dollar as traders speculated future European bailouts could include the kind of bank deposit levies imposed on Cyprus. Australia’s dollar slid along with Asian shares.
“Kuroda’s been talking up more aggressive easing and stamping out deflation,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “If the governor does what’s expected, we’ll probably see limited reaction in the currency. There’s probably more risk that the yen strengthens than weakens.”
The yen gained 0.3 percent to 94.18 per dollar as of 6:38 a.m. in London from yesterday. It rose 0.1 percent to 120.56 against the euro. The 17-nation currency added 0.2 percent to $1.2801, after yesterday touching $1.2751, the lowest level since Nov. 21.
The yen has gained 0.3 percent against the greenback this week, and 1.8 percent versus the euro. The common currency has fallen 1.5 percent against the dollar. Tomorrow is a holiday in most of Europe, the U.S., and much of Asia.
Kuroda Testimony
Kuroda told the upper house today that policy makers need to lower the longer end of the so-called yield curve, and that purchases of risk assets may also be needed. The comments echoed lower house testimony on March 26, when Kuroda pledged to buy more government bonds to reach the BOJ’s inflation goal. The central bank will meet on policy on April 3-4.
Expectations for additional BOJ stimulus have driven the yen down 17 percent in the past six months, the biggest decline among 10 developed-nation currencies tracked by the Bloomberg Correlation-Weighted Indexes. The U.S. dollar has risen 2.7 percent, while the euro has gained 2.2 percent.
Cypriot banks will open their doors to customers today for the first time in almost two weeks, with new rules curbing access to cash. They’ve been closed since March 16, when the European Union presented a plan to force losses on all depositors in exchange for a bailout. A subsequent agreement shuts Cyprus Popular Bank Pcl (CPB), the nation’s No. 2 lender, and imposes larger losses on uninsured depositors.
Yields Rise
Borrowing costs rose in Spain, Portugal and Italy yesterday, with the Italian 10-year yield at its highest relative to German bunds this year.
“These are the countries where the risk of deposit flight in the wake of the Cypriot crisis ‘resolution’ package is seen to run highest,” analysts at National Australia Bank Ltd., led by Sydney-based global head of research Peter Jolly, wrote in a research note. “Speculation is already mounting over who is the next candidate to whom the Cyprus ‘template’ might be applied,” with Slovenia and Malta bearing special mention, they wrote.
Italy is still without a government, a month after inconclusive elections. Democratic Party leader Pier Luigi Bersani said there was no chance of a broad coalition to end the political deadlock following nearly a week of talks with rival parties. He will report to President Giorgio Napolitano today with the results of his negotiations.
The euro has fallen 2 percent against the dollar this month and 3 percent in the first quarter of 2013. The Mexican peso is the biggest gainer against the greenback since the end of 2012, rising 4.1 percent.
U.S. Growth
Revised figures from the U.S. Commerce Department today may show the economy expanded at a 0.5 percent annual pace in the fourth quarter, faster than the government’s previous estimate of 0.1 percent growth, according to the median forecast in a Bloomberg News survey.
The Dollar Index (DXY) slid 0.2 percent to 83.092 after touching 83.302 yesterday, the highest level since August. The gauge, which IntercontinentalExchange Inc. uses to track the greenback versus the currencies of six U.S. trading partners, may rise toward 86 in the coming months, according to London-based NAB currency strategist Gavin Friend.
There’s been “no shortage of signs” that strong U.S. economic figures are pushing the currency higher, Friend wrote in an e-mailed note to clients yesterday.
“There is the potential for further U.S. dollar gains based on a further improvement in data,” he wrote.
Australia’s dollar slid 0.1 percent to $1.0431 as shares in the MSCI Asia Pacific Index (MXAP) lost as much as 0.9 percent.
To contact the reporters on this story: Kevin Buckland in Tokyo at kbuckland1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
