Yen Falls Versus Euro, Heads for Weekly Loss as Bank of Japan Holds Policy
Yen Set for Weekly Decline Against Euro on BOJ Outlook
Tomohiro Ohsumi/Bloomberg
The Bank of Japan will probably keep its benchmark interest rate near zero and refrain from increasing its credit programs when it concludes a two-day meeting today, according to all 14 economists surveyed by Bloomberg News.
The Bank of Japan will probably keep its benchmark interest rate near zero and refrain from increasing its credit programs when it concludes a two-day meeting today, according to all 14 economists surveyed by Bloomberg News. Photographer: Tomohiro Ohsumi/Bloomberg
May 20 (Bloomberg) -- Adam Cole, global head of currency strategy at Royal Bank of Canada in London, speaks with Bloomberg's Oliver Joy about the outlook for the dollar and the euro. (Source: Bloomberg)
May 20 (Bloomberg) -- Kathleen Brooks, research director at Forex.com, discusses the outlook for the euro and yen. She talks with Owen Thomas on Bloomberg Television's "Countdown." (Source: Bloomberg)
The yen fell against the euro, heading for its first decline in three weeks, as the Bank of Japan maintained monetary stimulus to support an economy in recession after a record earthquake.
Japan’s currency was set for a weekly loss against all of its major counterparts as BOJ Governor Masaaki Shirakawa and his colleagues decided to keep a 30-trillion yen ($367 billion) credit program and a 10-trillion yen asset-purchase fund that represent the bank’s main policy tools. The dollar is poised for a five-day decline against the euro before data forecast to show U.S. new home sales grew at a slower pace.
“Given that policy options are pretty limited, the BOJ probably wants to preserve as much ammunition as possible,” said Mari Iwashita, chief market economist at SMBC Nikko Securities Inc. in Tokyo. “Chances for additional easing are still alive and we could see the BOJ expand asset purchases by 5 trillion yen, as the deputy governor proposed, around August.”
The yen weakened 0.2 percent to 117.04 per euro as of 8:15 a.m. in London from 116.79 in New York yesterday, down 2.7 percent this week. The dollar was little changed at $1.4307 per euro, 1.3 percent lower since May 13. The yen depreciated 0.2 percent to 81.79 per dollar.
Japan’s gross domestic product contracted an annualized 3.7 percent in the three months through March, the Cabinet Office said yesterday, after a magnitude-9 earthquake and a deadly tsunami on March 11 disrupted supply lines and caused factories to shut.
BOJ Meeting
The BOJ kept its benchmark interest rate unchanged at a range of zero to 0.1 percent and refrained from increasing its credit programs at the end of a two-day meeting today, as predicted by all 14 economists surveyed by Bloomberg News.
“The BOJ is expected to emphasize its stance for monetary easing to support recovery from the earthquake, while its counterparts are moving toward tightening,” said Hitoshi Asaoka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “That should be a reason for people to avoid the yen.”
The yen has lost 5.4 percent this year in the biggest drop among the 10 developed-nation exchange rates tracked under Bloomberg Correlation-Weighted Currency Indexes. The dollar has fallen 4.7 percent, while the euro has risen 2.8 percent.
IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, was at 75.135 today, down from 75.757 on May 13.
U.S. Housing
Purchases of U.S. new houses advanced 1.7 percent to a 305,000 annual pace in April after gaining 11.1 percent the prior month, according to the median estimate of economists surveyed by Bloomberg before the Commerce Department’s report on May 24. Existing home sales unexpectedly fell 0.8 percent to a 5.05 million annual pace last month, the National Association of Realtors said yesterday.
“The U.S. economic recovery is losing momentum,” said Misato Nakashima, a currency analyst at Himawari Securities Inc. in Tokyo. “Expectations continue to fall about an early exit from monetary easing by the Fed, which is likely to be a dollar- sell factor.”
Fed Bank of New York President William Dudley said the central bank is falling short of its goals because of the modest pace of the recovery, with unemployment too high and headline inflation likely to ease.
“The recovery remains moderate and we still have a considerable way to go to meet the Fed’s dual mandate of full employment and price stability,” Dudley said yesterday in a speech in New Paltz, New York. Dudley is also set to speak about regional economic conditions today in Fishkill, New York.
New Zealand Budget
New Zealand’s dollar strengthened against the yen as the nation issues bonds to help pay for NZ$5.5 billion ($4.4 billion) of costs related to earthquake damage in Christchurch. The government yesterday projected an operating surplus of NZ$1.3 billion in the year ending June 2015.
“Demand for New Zealand government bonds is going to be very strong as a result of this budget,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “That will provide a bit of buying support for the currency.”
New Zealand’s dollar traded at 79.22 U.S. cents from 79.09 cents, set for a 0.6 percent gain this week. The so-called kiwi was at 64.77 yen from 64.54 yen yesterday, when it reached 64.93 yen, the strongest since May 3.
-- With assistance from Mayumi Otsuma in Tokyo and Allison Bennett in New York. Editors: Nate Hosoda, Matthew Brown.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
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