BLBG:Yen Rallies as Japan Official Amari Comments on Currency
The yen rose against all of its 16 major peers after comments by Japan’s economy minister stoked speculation the nation won’t try to spur further weakness in its currency.
The yen ended four days of declines against the dollar after Akira Amari said an excessively weak currency has negative effects on livelihoods. The dollar snapped a three-day loss against the euro as Asian share trimmed gains, rekindling demand for safer assets.
“The world has gone massively short yen on the idea that Japan is going to be more aggressive with its stimulus under the new prime minister,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC) “Comments like Amari’s are likely to spook those holding yen shorts.” A short position is a bet a currency will decline in value.
The yen rallied 0.6 percent to 88.99 per dollar as of 1:33 p.m. in Tokyo after yesterday reaching 89.67, the weakest since June 2010. It gained 0.8 percent to 118.83 per euro after touching 120.13 yesterday, the lowest since May 2011. The dollar rose 0.2 percent to $1.3352 per euro.
Hedge funds and other large speculators reduced bearish bets on the yen for a fourth week, according to data on currency futures compiled by the Washington-based Commodity Futures Trading Commission. Wagers on a decline in the yen outnumbered those betting on a gain by 74,096 on Jan. 8, down from 94,401 on Dec. 11 that was the most since July 2007.
Amari, Japan’s Minister for Economic and Fiscal Policy, said an excessive decline in the yen would cause a spike in import prices. It would be a benefit for exports while having harmful effects on consumers, he told reporters in Tokyo today.
BOJ Policy
The BOJ will review its 1 percent inflation goal at its next policy meeting on Jan. 21-22. The central bank will continue powerful monetary easing to help the weakening domestic economy, central bank Governor Masaaki Shirakawa said today at a meeting of BOJ branch managers.
The BOJ decided last month to increase the its asset purchase fund, its main policy tool, by 10 trillion yen ($112 billion) to 76 trillion yen. Shirakawa is due to step down in April after two of his deputies exit in March.
Prime Minister Shinzo Abe has demanded the central bank double its price target and said on Jan. 13 that he wants “bold policy leader” as the next BOJ governor. His Liberal Democratic Party swept to power in elections last month on a campaign of increased fiscal and monetary stimulus.
“It is very vital that the yen weakens, but whether or not that will happen may be outside the control of the Bank of Japan (8301), outside the control of Abe,” Andrew Su, the Sydney-based chief executive officer of Compass Global Markets, said in an interview with Bloomberg Television. A failure by Abe to deliver on unlimited easing could drive the yen “below 85 very very quickly,” he said.
The yen has lost 17 percent in the past six months, the biggest slump among the 10 developed-market currencies tracked by Bloomberg Correlation Weighted Indexes. The dollar was the second-biggest loser with a 4.9 percent slide.
Debt Ceiling
President Barack Obama warned Congress not to use the nation’s debt ceiling as leverage in the U.S. budget debate. Obama said at a White House press conference markets may go “haywire” if the limit isn’t raised.
The U.S. reached the statutory debt limit of $16.4 trillion Dec. 31, and the Treasury began using what it termed extraordinary measures to finance the government.
Federal Reserve Chairman Ben S. Bernanke said in Ann Arbor, Michigan yesterday that the federal budget must be brought under control and that the U.S. is in a “relatively fragile recovery.”
“Investors are increasingly focused on the U.S. debt ceiling, and concern that lawmakers won’t act till the very last moment is spurring a sell-off of the dollar,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles.
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
