BLBG:Dollar Drops Past 93 Yen Before U.S. Jobs Data; Aussie Advances
The dollar weakened past 93 yen for the first time in a month before data this week forecast to show the recovery in the U.S. job market isn’t fast enough to prompt the Federal Reserve to reduce monetary stimulus.
The yield premium on 10-year U.S. Treasuries over similar- maturity Japanese government bonds slid to the least in a month, sapping the relative advantage of dollar-based assets. The yen reached a five-week high against the euro as investors weighed the chances of new stimulus from the Bank of Japan (8301) at a two-day meeting starting tomorrow. Australia’s dollar extended a gain after the nation’s Reserve Bank held interest rates unchanged and signaled that existing stimulus is working.
“The U.S. economy isn’t strong enough to make a significant dent in the unemployment rate,” said Peter Dragicevich, a Sydney-based currency economist at Commonwealth Bank of Australia (CBA), the nation’s largest lender. “Given that’s one of the key thresholds the Fed is looking for, we can’t see it pulling back from its stimulus.”
The dollar dropped 0.5 percent to 92.77 yen as of 6:46 a.m. in London after touching 92.57, the weakest since March 1. It lost 0.1 percent to $1.2859 per euro. The yen climbed to 119.20 per euro, the strongest since Feb. 26, before trading at 119.25, up 0.5 percent from the close yesterday.
Companies in the U.S. probably added 200,000 jobs last month after an increase of 198,000 in February, economists forecast in a Bloomberg News survey before ADP Research Institute releases the data tomorrow. Government figures on April 5 are likely to show that the jobless rate was 7.7 percent in March, unchanged from the prior month, according to another poll.
Fed Policy
The Fed reiterated on March 20 that it will hold its benchmark interest rate near zero as long as the unemployment rate remains above 6.5 percent and inflation is projected to be no more than 2.5 percent.
The difference in yields between 10-year Treasuries and Japan’s bonds slid to 1.26 percentage points yesterday, the lowest since March 4.
The dollar has appreciated 2.1 percent in the past six months in a basket of the 10 developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The yen was the worst performer during the period with a 16 percent drop, while the euro advanced 1.6 percent.
Japan’s Prime Minister Shinzo Abe said today in parliament that the central bank shouldn’t pursue a 2 percent inflation target “at all costs” and may fail to achieve it should global conditions change.
BOJ Meetings
BOJ Governor Haruhiko Kuroda said the central bank will do whatever it can to beat deflation and that it will conduct bold monetary easing. He spoke in parliament today before leading his first policy meeting since taking over from Masaaki Shirakawa last month. The BOJ board will convene twice this month, with another meeting scheduled on April 26.
“Dollar-yen has eased off this week as we see some profit- taking ahead of the BOJ meeting,” said Khoon Goh, a senior foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd. (ANZ) “In order for the yen to weaken further, Kuroda really needs to surprise the market and deliver a larger easing.”
Reserve Bank of Australia Governor Glenn Stevens and his board today left the overnight cash-rate target at 3 percent, as predicted by all 28 economists surveyed by Bloomberg. There are a number of indications that the policy easing during late 2011 and 2012 is having an “expansionary effect on the economy,” Stevens said in a statement today.
Aussie Dollar
The RBA is “sounding more confident that monetary policy is still powerful -- it’s not pushing on a string, even at these low rates,” said Sean Callow, a Sydney-based senior currency strategist at Westpac Banking Corp. (WBC) “Speculators have ramped up their Aussie dollar positions very substantially.”
Australia’s dollar appreciated 0.3 percent to $1.0457, rising against most of its major counterparts.
In Europe, Italy’s President Giorgio Napolitano meets advisers today for talks on forming a new government. That’s followed by a monetary policy meeting by the European Central Bank on April 4.
Italy’s political impasse extended into a second month following inconclusive elections on Feb. 24-25. The divided parliament must come together behind a successor to the 87-year- old head of state before his mandate ends May 15.
“The euro has a downside risk,” said Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York. “There’s yet to be any resolution to the situation in Italy.”
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
