BLBG:Yen Weakens Past 102 After G-7; Dollar Gains as Yields Climb
The yen breached 102 per dollar for the first time in four-and-a-half years as Group of Seven finance chiefs indicated they’ll tolerate a slide in the currency for now as they focus on Japan’s recovery strategy.
The greenback strengthened versus 12 of its 16 major peers after Treasury benchmark 10-year yields rose to the highest in seven weeks and before Federal Reserve Bank of Philadelphia President Charles Plosser speaks tomorrow. The Australian dollar extended a slump from last week, the biggest five-day decline since November 2011, as Treasurer Wayne Swan is forecast to project a fifth and sixth year of budget deficits tomorrow.
“The trend for a weaker yen has been reactivated, and with the G-7’s tacit approval, I think the trend for weaker yen will gather pace this week,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “The market’s in the mood to try and take the dollar higher.”
The yen touched 102.15 per dollar, the weakest level since October 2008, before trading at 101.58 as of 6:57 a.m. in London, little changed from the close on May 10. It declined 2.6 percent last week, the most since the period ended April 5.
Japan’s currency added 0.1 percent to 131.90 per euro after reaching 132.4, the lowest since January 2010. The dollar was at $1.2983 per euro from $1.2989 at the end of last week.
G-7 finance ministers and central bankers reaffirmed their February commitment to “not target exchange rates” at a meeting in Aylesbury, near London, U.K. Chancellor of the Exchequer George Osborne told reporters May 11. Policy makers said they examined Japan’s strategy and that they will monitor its impact on currencies.
Futures Markets
Futures traders increased their wagers that the yen will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed last week. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on an increase -- so-called net shorts -- was 78,560 on May 7, compared with net shorts of 71,127 a week earlier.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 83.157 after earlier rising 0.2 percent. It will climb to 85.7 by year-end, according to the median of 10 forecasts compiled by Bloomberg.
Treasury 10-year bond yields rose two basis points, or 0.02 percentage point, to 1.92 percent after touching 1.94 percent, the most since March 26.
“There’s been a shift to a dollar-led market,” said Kumiko Gervaise, an analyst at Gaitame.com Research Institute Ltd. in Tokyo. “Gains in long-term Treasury yields are providing a tailwind for further dollar strength against the yen.”
Fed Debate
Plosser said May 9 that U.S. unemployment will probably fall to 7 percent at the end of 2013 and he would favor reducing the Fed’s $85 billion monthly pace of bond-buying next month. His remarks highlight a debate within the Federal Open Market Committee on whether to expand or curb the pace of asset purchases that pumped up the central bank’s balance sheet to $3.32 trillion.
“We see the Fed still tapering their bond purchases at some stage in the second half of the year, something that should bolster the dollar more widely,” said John Horner, a currency strategist in Sydney at Deutsche Bank AG, in a Bloomberg Television interview. “The U.S. economic recovery is very much entrenched at this point, and we don’t need that sort of stimulus for any longer.”
Italy is due to auction up to 8 billion euros ($10.4 billion) in debt maturing in 2016, 2018 and 2026. Germany and France are due to sell bills.
Australian Budget
The dollar’s advance may be capped before Commerce Department figures today forecast to show U.S. retail sales fell in April for a second month, according to the median estimate of economists surveyed by Bloomberg News. Excluding automobiles and gasoline, sales probably climbed.
Australia’s dollar slid toward an 11-month low before Swan announces the nation’s budget tomorrow, after saying yesterday that the strong currency gave an “unprecedented whack” to tax revenue.
National Australia Bank Ltd. said today its index of business confidence in the South Pacific nation fell to minus 2 in April, the lowest since November, from 2 in March. The nation’s central bank lowered interest rates to a record low 2.75 percent on May 7.
The so-called Aussie fell 0.3 percent to 99.97 U.S. cents after touching 99.61 on May 10, the weakest since June 14 and halting a record 10-month stretch of trading above parity.
It held declines after China reported industrial production rose 9.3 percent in April from a year ago, compared with the median economist forecast for a 9.4 percent gain. Retail sales increased 12.8 percent, matching estimates.
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
