BLBG:Yen Approaches 20-Month Low as Abe Presses BOJ on Easing
The yen fell for a sixth day against the euro before the Bank of Japan starts a two-day meeting tomorrow with newly elected Prime Minister Shinzo Abe pressing policy makers to increase stimulus.
Japan’s currency was near a 20-month low versus the dollar as Abe met today with BOJ Governor Masaaki Shirakawa. The euro advanced for a seventh day against the dollar, the longest run since April 2011, after Spain and Greece met their targets at bill sales. Sweden’s krona jumped after the central bank signaled it will not cut interest rates in 2013, even as it lowered its benchmark today.
“Abe hopes the Bank of Japan (8301) will consider the election result when they meet this week,” said Gavin Friend, a currency strategist at National Australia Bank Ltd. in London. “The yen will trade between 84.50 and 85.50 at the end of the year,” he said, referring to the rate against the dollar. “Everything we have seen since the election supports that view.”
The yen dropped 0.2 percent to 110.62 per euro at 10:20 a.m. London time after sliding to 111.32 yesterday, the lowest since March 21. The currency was little changed at 83.88 per dollar after falling to 84.48 yesterday, the weakest since April 12, 2011. The euro gained 0.2 percent to $1.3189.
Abe, whose Liberal Democratic Party swept to victory in elections for the lower house of Japan’s Parliament on Dec. 16, will have the chance to reshape the BOJ next year, when the terms of its governor and two deputies expire. The incoming prime minister reiterated yesterday he wants a 2 percent inflation target for the central bank, instead of its current goal is 1 percent.
Abe Meeting
Abe told reporters he requested Shirakawa to agree on an accord with the 2 percent inflation target at a meeting today.
The central bank will discuss setting a price target when it begins a two-day meeting tomorrow, the Nikkei said today, without saying where it got the information. A final decision is expected to be made in January, according to the report.
“Yen-selling is only half done,” said Noriaki Murao, managing director of the marketing group at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “Expectations are increasing for the BOJ to ease significantly.”
The implied volatility of Group-of-Seven currencies fell to the lowest level in five years, according to a JPMorgan Chase & Co. Index. The measure slid to 7.06 percent, the least since August 2007.
The yen has lost 12 percent this year, the worst performer of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar weakened 3.2 percent and the euro has dropped 1.5 percent.
Euro Gains
The euro climbed versus most of its major counterparts after Spain sold 3.52 billion euros of three- and six-month bills, versus a maximum target of 3.5 billion euros.
The krona strengthened for a second day versus the euro after the Stockholm-based Riksbank suggested it doesn’t expect to cut borrowing costs next year.
The central bank reduced its benchmark rate by a quarter of a percentage point to 1 percent. The decision was predicted by all except one of 17 economists surveyed by Bloomberg. The Riksbank said it expects the rate to be at 1.1 percent in a year, versus an October forecast of 1.3 percent.
The krona strengthened 0.5 percent to 8.7171 per euro, and climbed 0.7 percent to 6.6125 per dollar.
Dollar Index
The Dollar Index (DXY) approached a two-month low after President Barack Obama met with House Speaker John Boehner yesterday in talks to try and avoid the so-called fiscal cliff.
Obama put forward a new budget offer that would raise taxes by $1.2 trillion and increase tax rates for households earning more than $400,000 a year, a person familiar with the talks said. His plan would cut $1.22 trillion in federal spending, including interest savings, said the person, who spoke on condition of anonymity.
“The overall gap between the Republican and Democratic position on revenue increases -- the most contentious part of the talks -- appears to be narrowing,” BNP Paribas SA strategists led by Steven Saywell, London-based head of currency strategy, wrote in a note to clients yesterday. “FX markets are predictably slowing ahead of the year-end holidays, but we suspect the outcome of the fiscal-cliff negotiations will be important over the last two weeks of the year.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, fell 0.2 percent to 79.446 after dropping to 79.432, the least since Oct. 19.
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
