BLBG:Yen Heads for a Weekly Drop as Election Spurs Bets of BOJ Easing
The yen headed for its biggest weekly drop in almost five months on speculation Japan’s opposition party will take power after elections next month and increase pressure on the central bank to expand monetary easing.
The yen held yesterday’s steepest slide in two months versus the euro before Japanese Prime Minister Yoshihiko Noda dissolves parliament today. The dollar headed for a five-day decline against the 17-nation currency before data forecast to show U.S. industrial production growth slowed, supporting the case for the Federal Reserve to continue stimulus measures. Singapore’s dollar fell after the government said growth this year will be at the lower end of its previous forecast.
“There’s a lot of political risk embedded in the yen,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “If the opposition came into power, then there would be more pressure on the Bank of Japan (8301) to pursue more aggressive quantitative easing. That’s going to be bearish for the currency.”
The yen traded at 81.12 per dollar at 2 p.m. in Tokyo from 81.17 at the close yesterday, when it touched 81.46, the weakest since April 25. It has lost 2 percent this week, the most since the five days ended June 22.
The Japanese currency bought 103.56 per euro following a 1.5 percent drop yesterday, the biggest slide since Sept. 14, to 103.75. The dollar fetched $1.2769 against the euro from $1.2781, set for a 0.4 percent decline since Nov. 9.
Easing Call
Prime Minister Yoshihiko Noda will dissolve parliament today, triggering an election on Dec. 16 that polls suggest his ruling Democratic Party of Japan will lose. Shinzo Abe, the leader of the main opposition Liberal Democratic Party, said yesterday the BOJ should pursue unlimited monetary stimulus to end deflation and revive the economy.
Japan’s government today downgraded its view of the economy for a fourth month, the longest streak since the global financial crisis. Gross domestic product shrank last quarter at the fastest pace since 2011’s record earthquake.
Markets are pushing the yen lower “as expectations of more aggressive action after elections to the weaken the currency grow,” Mitul Kotecha, Hong Kong-based head of foreign-exchange strategy at Credit Agricole SA (ACA), wrote in a note to clients today. “The fourth-consecutive downgrade of Japan’s economic assessment by the government highlights the urgency for such action.”
BOJ Stimulus
All 21 economists surveyed by Bloomberg News expect BOJ Governor Masaaki Shirakawa’s board to take no action at a two- day meeting through Nov. 20. At its last meeting on Oct. 30, the central bank increased asset purchases by 11 trillion yen ($136 billion), announced a new lending program and signed a joint statement with the government on ending deflation. Fifteen economists in the survey expect the BOJ will add to easing in December.
The 14-day relative strength index for the yen versus the greenback rose to 69.3 yesterday, near the 70 level that some traders see as a sign that an asset price may reverse course. A similar gauge for the Japanese currency against the euro advanced to 60.2.
In the U.S., output at factories, mines and utilities probably rose 0.2 percent in October, after gaining 0.4 percent in the prior month, according to the median estimate of economists in a Bloomberg poll before the data release today. Reports due on Nov. 20 are expected to show existing-home sales, housing starts and residential permits all declined in October.
Fed Chairman Ben S. Bernanke said yesterday the U.S. central bank will take action to speed growth and a rebound in the nation’s housing market.
Quantitative Easing
Bernanke and his policy-making colleagues last month affirmed their September decision to buy $40 billion of mortgage-backed debt a month in a third round of so-called quantitative easing, without specifying the total size or duration of the purchases. The central bank bought $2.3 trillion of bonds from December 2008 and June 2011, debasing the dollar.
The dollar lost 2.1 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes which track 10 developed-nation currencies. The yen dropped 3.2 percent and the euro fell 1.7 percent.
The Singapore dollar fell to a one-month low versus its U.S. counterpart after the nation’s Trade Ministry said in a statement the economy will grow 1 percent to 3 percent in 2013 after expanding about 1.5 percent this year, lower than the previous forecast of as much as 2.5 percent in 2012.
The island’s dollar slid as much as 0.4 percent against the greenback to S$1.2286, the weakest since Oct. 12, before trading at S$1.2280.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
