BoA Merrill Lynch Raises Yen Forecasts on Prospects for More Fed Easing
Sept. 1 (Bloomberg) -- Former Bank of Japan board member Nobuyuki Nakahara talks about the central bank's decision to expand a bank-loan program as a means of halting the yen's advance. He speaks from Tokyo with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
Aug. 31 (Bloomberg) -- Shaun Osborne, chief currency strategist at TD Securities Inc., talks about the outlook for the dollar-yen exchange rate. Osborne speaks with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Aug. 31 (Bloomberg) -- Thomas Harr, Singapore-based Asia foreign-exchange strategy head at Standard Chartered Plc, talks about Japan's attempts to stem gains in the yen. Bank of Japan Governor Masaaki Shirakawa and his board expanded a bank-loan program by 10 trillion yen ($118 billion) after an emergency meeting yesterday in the wake of the yen reaching a 15-year high. Harr also discusses the outlook for the Japanese and U.S. economies. He speaks with Linzie Janis on Bloomberg Television's "Global Connection." (Source: Bloomberg)
Aug. 31 (Bloomberg) -- Thio Chin Loo, a senior currency analyst at BNP Paribas SA, talks about the options available to Japanese policymakers to curb the advance of the yen. She speaks from Singapore wiith Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
Bank of America Merrill Lynch raised forecasts for the yen on prospects the Federal Reserve will increase monetary easing to preserve the U.S. economic recovery.
The brokerage expects the yen to end 2010 at 81 to the dollar from a previous forecast of 90, it said in a report today. The Japanese currency will finish the fourth quarter at 93 per euro from an earlier call of 104, the company said.
Minutes of the Fed’s Aug. 10 meeting released yesterday showed that several officials said the central bank would need to consider ways to add monetary stimulus “if the outlook were to weaken appreciably further.” Business activity in the U.S. expanded in August at the slowest rate this year, a private survey showed yesterday.
“Because of weak U.S. indicators, the market will continue to expect quantitative easing to resume, which would push the dollar-yen rate down further,” Tomoko Fujii, a Tokyo-based currency strategist at Merrill Lynch, wrote in the report.
Japanese authorities may consider intervention in markets to weaken the yen and protect exporters if the currency approaches its postwar high of 79.75 level, Fujii wrote. Global risk aversion has driven gains in the yen, which reached 83.60 per dollar on Aug. 24, the strongest since June 1995. It traded at 84.36 to the dollar as of 2:16 p.m. in Tokyo.
The yen will weaken gradually in 2011 as prospects for global growth improve, boosting risk tolerance, Merrill Lynch said. The currency will end 2011 at 90 to the dollar and 99 to the euro, from previous targets of 97 and 107 respectively, according to the report.
The yen tends to gain in times of economic or financial turmoil as Japan’s current-account surplus means it doesn’t need foreign capital. A stronger domestic currency hurts the overseas competitiveness of Japanese exporters and reduces the value of their earnings from other countries.
To contact the reporter on this story: Yuki Yamaguchi at yyamaguchi10@bloomberg.net.
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