Yen Tumbles After Bank of Japan Monetary Easing; Euro Falls Before Summit
The yen fell against all its most- traded counterparts after the Bank of Japan said it would increase the size of its asset-purchase fund.
Japan’s currency fell to a six-month low versus the dollar in its biggest weekly loss against the dollar since November as better-than-expected economic data damped expectations of further monetary easing in the U.S. The euro fell versus the dollar after Moody’s downgraded the debt ratings of six European nations and said more may follow. Euro-area finance ministers meet Feb. 20 meeting to decide the fate of a Greek financial bailout.
“You have the policy easing in Japan, which is pushing the yen lower,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. “There are some structural issues in Japan we’re keeping an eye on that the long-time pillars of yen strength are starting to deteriorate.”
The yen fell 2.5 percent to 79.55 versus the dollar, the biggest weekly loss since Nov. 4. It touched 79.62 the weakest since Aug. 4. The Japanese currency declined 2.1 percent to 104.54 against the euro. On Feb. 17, it reached 104.67, the weakest since Dec. 5. The euro fell 0.4 percent to $1.3140 after touching $1.2974, the lowest since Jan. 25.
Bank of Japan
Japan’s central bank increased its asset-purchase fund to 30 trillion yen, expanding economic stimulus measures for the first time since October. The BOJ also said it will target 1 percent inflation “for the time being.”
The dollar was supported against the yen as the New York- based Conference Board’s gauge of the U.S. outlook for the next three to six months increased, manufacturing in the Philadelphia area expanded by the fastest in four months and initial jobless claims fell to the lowest in four years.
The euro weakened after Moody’s downgraded Italy, Spain and Portugal and said it may strip France, the U.K. and Austria of their top Aaa ratings, citing the debt crisis.
Euro-region finance ministers will meet to determine whether to award Greece a second aid package worth 130 billion euros ($171 billion.) The shared currency fell after the meeting was rescheduled from Feb. 15 when Luxembourg Prime Minister Jean-Claude Juncker, head of the euro-region finance chiefs, said Greece needed to work on details of the agreement.
‘Agreement on Greece’
The euro’s weekly loss against the dollar was limited as Italian Prime Minister Mario Monti, German Chancellor Angela Merkel and Greek Prime Minister Lucas Papademos expressed optimism that an “agreement on Greece” can be reached and the European Central Bank participated in a bond swap for Greek debt.
“The bond swap implies that the second bailout is likely to happen,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto said on Feb. 16.
Futures traders added 8,048 more bets the common currency will fall against the dollar than bets it will gain in the five days ended Feb. 14. The so-called net shorts totaled 148,641, compared to a record 171,347 reached Jan. 27.
New Zealand’s dollar was the best performing currency against the dollar gaining 0.7 percent to 83.23 U.S. cents and rallying 3.2 percent to 66.21 yen after Reserve Bank Governor Alan Bollard said the country’s economic performance may be understated.
Traders (CS1YRBNZ) are betting New Zealand’s central bank will raise rates by 0.15 percentage point over the next 12 months, according to a Credit Suisse Group AG index based on swaps. On Feb. 6, wagers went from a projected cut to an increase. The Reserve Bank of New Zealand has kept the official cash rate at a record-low 2.5 percent since March.
Norway, Sweden
Norway’s krone rallied 0.5 percent to 5.714 per dollar and 1 percent to 7.51 versus the euro. Policy makers in the nation are renewing their efforts to talk down the currency to support exports. The nation’s central bank is monitoring the krone after its recent gains, Governor Oeystein Olsen said. Crude oil futures rose 5 percent to $103.99 a barrel in New York, its biggest weekly advance since Dec. 23.
Sweden’s krona weakened against all its major counterparts excluding the yen after the central bank unexpectedly cut interest rates by 0.25 percent, citing a drag on exports from Europe’s debt crisis.
The krona fell 1 percent to 6.728 per dollar and declined 0.5 percent to 8.8394 versus the euro.
Yen, Dollar Drop
The yen has tumbled 6.5 percent over the past month and the dollar dropped 3.2 percent, the worst performers among 10 developed-market currencies according to Bloomberg Correlation- Weighted Indexes. The euro gained 0.6 percent over the period.
Japan’s Finance Minister Jun Azumi reiterated at a parliamentary budget committee session in Tokyo on Feb. 13 that he’ll act on excessive and speculative moves in the currency. Japan spent 14.3 trillion yen ($185 billion) in intervention operations last year to stem gains in the currency as it rose to postwar records against the dollar, hurting the nation’s exporters.
“The 10 trillion yen the Bank of Japan pumped in to the economy is still a fairly modest amount in the big scheme of things,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. “The yen may have further room to the downside, particularly if the Fed holds off from embarking on a third round of monetary easing this year.”
To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
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