BLBG:Dollar Extends Biggest Weekly Gain Versus Yen in 3 Years on Fed
The dollar extended its biggest weekly gain versus the yen since 2009 having surged after Federal Reserve Chairman Ben S. Bernanke outlined the case for U.S. stimulus to be withdrawn as the economy keeps improving.
The U.S. currency was poised for a weekly advance against all of its major counterparts before reports next week that economists said will show home prices and durable-goods orders increased. The yen weakened against 15 of its 16 major peers today as stocks rose, reducing demand for the safety of Japan’s currency. South Korea’s won dropped to a one-year low after the nation’s financial regulator said it will intensify monitoring of foreign-exchange markets.
“For the remainder of the year we think the dollar will rally, pretty much across the board,” said Alvin Tan, a director of foreign-exchange strategy at Societe Generale SA in London. “The Fed is becoming more hawkish relative to other central banks and the Bank of Japan is just starting on its massive quantitative-easing program. Monetary-policy divergence will drive the dollar ahead.”
The dollar rose 0.5 percent to 97.76 yen at 9:45 a.m. in London, extending this week’s gain to 3.7 percent, the most since December 2009. The U.S. currency was little changed at $1.3222 per euro. The yen fell 0.5 percent to 129.26 per euro.
The Federal Open Market Committee left the monthly pace of bond purchases at $85 billion on June 19, saying “downside risks to the outlook for the economy and the labor market” have diminished. Policy makers raised growth forecasts for next year to a range of 3 percent to 3.5 percent and reduced their outlook for unemployment to as low as 6.5 percent.
Moderate Purchases
“If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the pace of purchases later this year,” Fed Chairman Ben S. Bernanke said in a press conference in Washington after the central-bank meeting.
The U.S. Commerce Department will say on June 25 that durable-goods orders rose 3 percent in May, expanding for a second month, according to a Bloomberg News survey of economists. An industry report the same day will show the S&P/Case-Shiller (SPCS20Y%) index of property values gained 10.6 percent in April from a year earlier, according to another survey.
The Dollar Index, which IntercontinentalExchange Inc. uses to monitor the greenback against the currencies of six U.S. trade partners, was little changed at 81.87, having gained 1.5 percent this week. The gauge will climb to 85.70 by year-end, according to the median forecast of economists and strategists surveyed by Bloomberg.
Yen’s Decline
The yen has fallen 2.9 percent this week against the euro, poised for the biggest slide since the period ended April 5, the same week the Bank of Japan said it will buy more than 7 trillion yen of bonds every month.
Japan’s Nikkei 225 (NKY) Stock Average added 1.7 percent.
The JPMorgan Global FX Volatility Index was at 11.42 percent after touching 11.51 percent yesterday, the highest since June 2012. The average in the past year is 8.66 percent.
The won dropped for a second day as overseas investors sold more of the nation’s stocks than they bought for an 11th day.
The Financial Supervisory Service said yesterday it will strengthen monitoring of foreign-exchange markets after the U.S. central bank signaled June 19 it may start reducing bond purchases this year.
“Since Bernanke’s comments about the possible early stimulus exit globally investors are buying the dollar,” said Hong Seok Chan, an analyst at Daishin Economic Research Institute in Seoul. “The government could intervene if market volatility increases.”
The won fell 0.7 percent to close at 1,154.15 per dollar after depreciating to 1,159.33, the weakest since June 2012.
The Bloomberg-JPMorgan Asia Dollar Index (ADXY), which tracks the region’s 10 most-active currencies, rose 0.2 percent today, trimming this week’s decline to 1.1 percent, the biggest since September 2011.
To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
