BLBG:Yen Rallies From 7-Month Low as BOJ Refrains From Easing
The yen rallied from near its weakest level in almost seven months as the Bank of Japan (8301) refrained from adding to measures that tend to debase the currency.
The Japanese currency rose versus most of its 16 major counterparts as BOJ Governor Masaaki Shirakawa and his board kept policy unchanged amid calls for unlimited easing by opposition leader Shinzo Abe, who polls indicate may become prime minister following elections next month. The euro weakened after Moody’s Investors Service downgraded France, renewing concern that Europe’s debt crisis will deepen.
“The markets are pausing for breath in dollar-yen after a run up in the last couple of weeks,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “They’re now thinking about the election, who’s likely to win it and what form the next government would take.”
The yen climbed 0.2 percent to 81.28 per dollar as of 6:57 a.m. in London. It touched 81.59 yesterday, the weakest since April 25. Japan’s currency climbed 0.4 percent to 103.94 per euro. Europe’s currency lost 0.2 percent to $1.2787.
The BOJ said today it would keep its asset-purchase fund at 66 trillion yen ($812 billion) and a credit-lending facility at 25 trillion yen.
Goal Increase
Abe, head of Japan’s Liberal Democratic Party and the leading contender to become prime minister after an election on Dec. 16, has advocated an increase in the central bank’s inflation goal to as much as 3 percent from 1 percent. The BOJ is scheduled to hold a policy meeting three days after the election, with 16 economists forecasting easing.
A victory for Abe would mean he will lead a government in charge of picking the BOJ’s next top three officials, as Shirakawa ends a five-year term on April 8. His deputies Hirohide Yamaguchi and Kiyohiko Nishimura exit in March.
The 14-day relative strength index for the dollar-yen rate was at 71 yesterday, above the 70 level some traders see as a sign an asset’s move may reverse course.
“The move in the dollar-yen looks a bit overdone,” Mitul Kotecha, Hong Kong-based head of currency strategy at Credit Agricole SA (ACA), said in an interview on Bloomberg Television. “I don’t think we’re going to see a quick move up to 85.”
The yen and euro have both fallen more than 6 percent over the past 12 months, the biggest declines among the 10 developed- nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has dropped 0.2 percent.
France Cut
Moody’s cut France by one grade to Aa1 from Aaa and said its outlook remains negative.
“France’s fiscal outlook is uncertain as a result of its deteriorating economic prospects,” the ratings company said in a statement dated yesterday.
The downgrade follows similar action by Standard & Poor’s in January. Since S&P’s rating action, French government bonds have gained 9.4 percent, compared with 3.4 percent for German debt, and 2.5 percent for that of the U.S., according to Bank of America Merrill Lynch data.
“The euro is being sold on the back of France’s downgrade and it’s possible it could test a bit lower from here,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711) “The news was somewhat expected, so it’s unlikely the euro will tumble, but it would certainly keep it under downward pressure while the market looks for where the next downgrade would be.”
Brussels Meeting
Finance officials from France, Germany, Italy and Spain convened yesterday in Paris to forge a common position on Greece’s next aid payment before a gathering with the rest of their euro-area counterparts today in Brussels, according to a European aide.
Lengthening maturities on Greek debt and lowering rates on the country’s bailout loans are the main options being discussed to plug a funding gap, said the official, who declined to be named because the talks aren’t public.
Europe’s shared currency may slide as it trades near the so-called neck line of an M-shaped trading pattern known as a double-top formation, according to Brown Brothers Harriman & Co.
It may drop toward $1.2450 as it trades near $1.28, the neck line between a high of $1.3172 on Sept. 17 and a peak of $1.3140 on Oct. 17, Marc Chandler, New York-based global head of currency strategy at BBH, wrote in an e-mailed note to clients yesterday. The $1.2450 level was last seen on Aug. 22, when it dipped to as low as $1.2431.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
