BLBG:Yen Rises Most in Six Weeks After BOJ Meeting as Euro Advances
The yen strengthened the most in six weeks against the dollar as the Bank of Japan maintained its inflation goal at 1 percent after newly elected Prime Minister Shinzo Abe called for a doubling of the target.
Japan’s currency rose for the first time in eight days versus the euro even as the central bank expanded its asset- purchase fund by 10 trillion yen ($119 billion) to 76 trillion yen. The euro approached an eight-month high against the dollar before a regional report forecast to show consumer confidence improved in December. The pound dropped for a third day against the euro as a report showed retail sales unexpectedly stagnated last month.
“There’s a sell on the fact,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London, referring to the BOJ decision. “The market got a little bit over-excited about the inflation target. The move we saw in the yen was over-extended and we’re now seeing some pullback.”
The yen gained 0.4 percent to 84.10 per dollar at 7:21 a.m. New York after rising as much as 0.7 percent, the biggest increase since Nov. 8. Japan’s currency climbed 0.2 percent to 111.47 per euro. The common currency advanced 0.2 percent to $1.3252. It appreciated to $1.3308 yesterday, the strongest since April 3.
The yen is likely to trade at 83 per dollar at the end of June, Rabobank’s Foley said.
BOJ Decision
The Bank of Japan (8301) kept its credit-lending program at 25 trillion yen and left its key interest rate unchanged between zero and 0.1 percent at its two-day meeting in Tokyo. Abe, whose party swept to victory in the Dec. 16 election, will have a chance to reshape the BOJ early next year when the terms of Governor Masaaki Shirakawa and his two deputies expire.
Japan’s currency has tumbled 13 percent this year, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar weakened 3.5 percent and the euro dropped 1 percent.
“Investors might have wanted to hear more details on the inflation target from the BOJ, pushing the yen higher,” said Masafumi Yamamoto, chief foreign-exchange strategist at Barclays Plc in Tokyo. “The policy decision itself came in line with expectations.”
The euro rose for the eighth time in nine days against the dollar before today’s consumer confidence data.
An index of household confidence climbed to minus 26.5 this month from minus 26.9 in November, according to a Bloomberg News survey before the European Commission in Brussels releases the data at 3 p.m. London time.
The euro has gained this week as a German report yesterday showed business confidence was higher than economists forecast in December and Standard & Poor’s raised Greece’s credit rating from selective default on Dec. 18.
Dollar Index
The Dollar Index (DXY) fell for a fifth day before House Republicans vote today on a tax increase for top earners, which they previously labeled as job-killing class warfare.
Lawmakers are struggling to reach agreement to avert more than $600 billion in tax increases and spending cuts set to start in January. Even as Republicans seek to bridge their internal divide over taxes by combining spending reductions with House Speaker John Boehner’s plan, the White House has declared his proposal dead on arrival and told business leaders that talks between President Barack Obama and Boehner are regressing.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, fell 0.1 percent to 79.189 after falling to 79.008 yesterday, the lowest level since Oct. 18.
Pound Declines
The pound declined for a third day against the euro after the Office for National Statistics said retail sales including fuel were unchanged last month. The median prediction of economists in a Bloomberg survey was for a 0.4 percent gain.
The pound weakened 0.1 percent to 81.51 pence per euro, after dropping 0.2 percent in the previous two days.
South Korea’s won declined from a 15-month high against the dollar after the ruling party’s Park Geun Hye was elected president, damping speculation of a major shift in the nation’s exporter-friendly policies.
The won weakened 0.2 percent to 1,074.85 per dollar at the close of trading in Seoul after appreciating to 1,070.73 on Dec. 18, the strongest since September 2011. The nation’s financial markets were shut yesterday for the election.
To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
