BLBG:Yen Drops to Lowest Since June 2009 Against Dollar on BOJ Moves
The yen dropped to the weakest since June 2009 on expectations Bank of Japan (8301) measures to fight deflation announced last week will debase the currency further.
The yen pared declines after finance ministry data showed Japan’s current account surplus, the widest measure of trade, was larger than economists forecast. The dollar remained lower versus the euro, following a three-day loss, ahead of remarks by Federal Reserve Chairman Ben S. Bernanke today after a report last week showed U.S. employers added the least jobs in nine months in March. The won slid to the weakest in more than eight months as military tensions on the Korean Peninsula escalated.
“The yen is still trading on the back of the monetary policy decisions last week,” said Greg Gibbs, a Singapore-based senior currency strategist at Royal Bank of Scotland Group Plc. “We’ve come to levels which are now starting to attract some profit-taking from those who had managed to buy earlier.”
The yen reached 98.85 per dollar, the weakest since June 2009, before trading at 98.61 as of 7:36 a.m. in London, 1.1 percent lower than the April 5 close. It tumbled 3.4 percent last week, the biggest drop in more than three years. The Japanese currency fell 1 percent to 128.02 per euro after reaching 128.44, the weakest since January 2010.
The greenback traded at $1.2982 per euro after falling 1.3 percent last week to $1.2991.
Japan’s current account surplus was 637.4 billion yen ($6.5 billion) in February compared with the median economist estimate of 457.5 billion yen in a Bloomberg News survey. The current account was in deficit for three months through January.
BOJ Decision
The yen was sold early in the Asian trading session amid very thin liquidity and may be bought back, said Tim Kelleher, the head of institutional foreign-exchange sales in Auckland at ASB Institutional, a unit of Commonwealth Bank of Australia.
BOJ officials said April 4 the central bank will increase its monthly bond purchases to 7.5 trillion yen, exceeding the 5.2 trillion yen forecast by economists surveyed by Bloomberg News. They also suspended a cap on some bond holdings and dropped a limit on debt maturities. The policy makers set a two- year horizon for their goal of 2 percent inflation.
The two-day policy meeting was the first led by Governor Haruhiko Kuroda since he took office last month. The BOJ’s next policy meeting is on April 26.
Second Meeting
“We expect the market to price in extra policy announcements as we move towards the 26 April meeting,” Barclays Plc currency strategists including Chris Walker in London wrote in a research note. The bank forecasts the yen will drop to 103 per dollar within three months, compared with the median forecast for it to trade at 95 by the end of the second quarter, data compiled by Bloomberg show.
Japan’s currency, traditionally considered a haven, fell on April 5 for a second day against the greenback even as a Labor Department report showed U.S. payrolls grew by the least in nine months.
“Many investors were waiting for potential downside for dollar-yen after the nonfarm payrolls, but now we’ve passed that event it’s much easier to build fresh dollar-yen long positions, and so many investors are moving in that direction,” said Yunosuke Ikeda, head of foreign-exchange strategy at Nomura Securities Co. in Tokyo.
The yen must get through key support at 99.75 before it can test 100 to the dollar, a level not seen since April 2009, Ikeda said, referencing the 50 percent retracement on the Fibonacci chart from the 2007 low on June 22 of 124.14 to the all-time high of 75.35 reached on Oct. 31, 2011.
“By significantly breaking that level, investors tend to believe the yen has entered a new phase, as opposed to just a recovery,” he said.
The yen has plunged 21 percent in the past six months, the worst performance among 10 developed market currencies tracked by the Bloomberg Correlation Weighted Indexes. The dollar has risen 1.8 percent and the euro climbed 1.9 percent.
Bernanke’s Plan
Demand for the dollar was limited before Bernanke speaks at the Fed Bank of Atlanta 2013 Financial Markets Conference today. The U.S. central bank’s next policy meeting is April 30-May 1.
The Fed is buying $85 billion of bonds a month in the third round of its quantitative-easing strategy to spur the economy. While policy makers reiterated after their March meeting the U.S. central bank will maintain its purchases until there’s significant improvement in the labor market, Bernanke told reporters the pace may be altered if warranted by a healing economy.
The South Korean won slid as heightened risk of conflict with North Korea spurred outflows of foreign funds. The currency weakened 0.7 percent to 1,140.15 per dollar after touching 1,139.59, the lowest since July 27, according to data compiled by Bloomberg.
Won Slides
“Tensions with North Korea are intensifying, making investors nervous,” said Jeon Seung Ji, analyst at Samsung Futures Inc. in Seoul. Authorities “may try to take action if they find market reactions are excessive, while investors will also eye the yen-won movement.”
Global funds sold more Korean stocks than they bought, as they have on all but two days in the past three weeks after President Park Geun Hye’s office said the North may fire a missile around April 10. North Korea last week warned embassies to evacuate as it won’t be able to guarantee the safety of foreign missions starting April 10 in the event of a conflict. The regime told South Korean companies to leave the Gaeseong joint industrial complex by the same date.
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
