BS: Yen Falls as Bank of Japan Boosts Lending; Swedish Krona Slides
The yen slid to the weakest this month against the dollar and the euro after the Bank of Japan boosted its lending programs and said it will maintain monetary easing to stamp out deflation.
Japan’s currency fell versus all except two of its 16 major counterparts as BOJ officials retained a pledge to expand the monetary base, doubled part of a growth lending program and said banks could borrow more money at low interest rates. Sweden’s krona dropped the most in two weeks versus the dollar after a report showed consumer prices unexpectedly fell from a year earlier. The Thai baht led emerging-market currencies lower as police clashed with protesters in Bangkok.
“There’s scope for dollar-yen to head higher on any dovish news from the Bank of Japan,” said Michael Sneyd, a currency strategist at BNP Paribas SA in London. “Long dollar-yen is one trade we like,” he said, referring to a bet that the U.S. currency will appreciate.
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The yen fell 0.6 percent to 102.56 per dollar at 7:17 a.m. in New York after depreciating to 102.74, the weakest level since Jan. 31. Japan’s currency slid 0.8 percent to 140.77 per euro after dropping to 140.86, the least since Jan. 29. The dollar fell 0.1 percent to $1.3726 per euro.
Japan’s gross domestic product grew at an annualized 1 percent in the fourth quarter of 2013, down from 1.1 percent in the previous three months, the Cabinet office said yesterday, missing analysts’ forecasts and boosting speculation for more central bank easing.
Japanese Growth
The BOJ’s decision to extend its lending programs “is boosting risk appetite and yen selling,” said Yousuke Hosokawa, the head of the foreign-exchange sales team at Sumitomo Mitsui Trust Bank Ltd. in Tokyo.
The yen will weaken to 110 per dollar by year-end, according to the median estimate in a Bloomberg survey of economists. BNP expect a drop to 118, the sixth most bearish forecast for the currency, the data show.
The yen slumped 5.9 percent in the past six months, the biggest decline after Canada’s dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 0.5 percent, while the euro gained 2.8 percent.
The krona dropped versus all its 16 major counterparts as Statistics Sweden said the consumer price index fell 0.2 percent in January from a year earlier. The median estimate in a Bloomberg survey was for an increase of 0.1 percent.
Fighting Inflation
Sweden’s central bank Governor Stefan Ingves pledged last week to prioritize fighting inflation after keeping the benchmark interest rate at 0.75 percent and saying policy won’t be tightened until early 2015. Policy makers in December turned from predicting higher rates to easing policy for the first time in a year as concern over deflation outweighed those over a credit bubble.
The krona slid fell 0.7 percent to 6.4953 per dollar, the biggest decline since Jan. 30. The Swedish currency slipped 0.9 percent to 8.9184 per euro.
The baht slumped the most in more than six weeks as police moved to clear anti-government demonstrators from a protest camp in Bangkok. Resulting clashes killed two people and wounded at least 58, security and emergency officials said.
The Thai currency slid 0.6 percent to 32.461 per dollar, the biggest decline since Jan. 2. The Indonesian rupiah weakened 0.5 percent to 11,844 per dollar.
Dollar Index
The Bloomberg Dollar Spot Index rose before the Federal Reserve releases minutes of its January policy meeting tomorrow.
The Fed announced in December it would start paring stimulus by cutting its monthly bond purchases by $10 billion per month, and policy makers decided on another reduction of the same size last month, to $65 billion.
“You’re likely to see easier monetary policy out of the European Central Bank and the Bank of Japan at a time when the marginal change at the Fed is actually toward less accommodation,” said Russ Koesterich, global chief investment strategist at New York-based BlackRock Inc., which manages $4.3 trillion. “That should support a stronger dollar versus the euro and the yen,” Koesterich said in Sydney.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 of its major counterparts, gained 0.1 percent to 1,018.73.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
