Yen Drops on BOJ Stimulus Signs, Asian Stock Gains

The yen weakened versus all 16 major counterparts as Asian shares rallied and minutes of the Bank of Japan (8301)’s July meeting signaled policy members are considering ways to expand stimulus.

Japan’s currency slid for a second day against the euro as Asian equities halted a two-day decline, curbing demand for haven assets. The euro maintained gains after data today showed France’s economy unexpectedly avoided a contraction and German growth slowed less than forecast during the second quarter. New Zealand’s dollar was supported after a report showed retail sales increased by more than economists forecast.

“There’s going to be no change to the BOJ’s stance so long as they’re short of their inflation goal,” Sacha Tihanyi, a Hong Kong-based senior currency strategist at Scotiabank, a unit of Bank of Nova Scotia (BNS), said in reference to the central bank’s 1 percent price target. Sentiment today “is looking a little bit better, so I think that’s pretty much consistent with a little bit of softening in the yen.”

The yen lost 0.2 percent to 78.46 per dollar as of 7:07 a.m. in London. It fell 0.4 percent to 96.98 per euro. The 17- nation currency advanced 0.3 percent to $1.2363 after rising 0.4 percent yesterday, the biggest one-day advance since Aug. 3.

The MSCI Asia Pacific Index (MXAP) of shares climbed 0.2 percent.

The BOJ avoided adding stimulus at its July meeting, expanding its asset-purchase program to 45 trillion yen ($574 billion) from 40 trillion, while cutting its loan facility to 25 trillion yen from 30 trillion yen.

BOJ Options

A few board members said the BOJ shouldn’t rule out any options in advance, while one said price gains without economic improvement are not good, minutes of the gathering showed today. The BOJ established its inflation goal in February.

Figures released yesterday showed Japan’s economy grew at an annualized 1.4 percent in the three months through June 30, missing economist estimates for a 2.3 percent pace.

The yen has declined 2.5 percent in 2012, the third-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro dropped 5.5 percent in the same period, the biggest slide among the gauge’s members. The dollar fell 0.4 percent.

France’s gross domestic product was unchanged in the second quarter from the first, national statistics office Insee in Paris said today in an e-mailed statement. Economists forecast a 0.1 percent decline, according to the median of 26 estimates in a Bloomberg News survey.

Germany’s GDP rose 0.3 percent from the first quarter, when it gained 0.5 percent, the Federal Statistics Office said in Wiesbaden today. Economists predicted a 0.2 percent increase, according to the median estimate in a Bloomberg poll.

The euro region will report GDP figures later today.

Euro Technicals

The euro’s recent declines below its 21-day moving average may signal a drop to 94.12 yen, Citigroup Inc.’s Tokyo-based currency strategist Osamu Takashima wrote in a report published today. The level was last seen on July 24 and was the least since November 2000, according to data compiled by Bloomberg. “The downside risk for the pair must obviously be larger than the upside,” Takashima wrote.

A U.S. Commerce Department report today may show retail sales climbed 0.3 percent last month, following a 0.5 percent slide in June, according to the median estimate of economists polled by Bloomberg. A separate report will probably show producer prices increased in July, based on another survey.

“Everybody’s waiting to hear what the Federal Reserve does,” Scotiabank’s Tihanyi said. “If you get continually weak prints out of certain economic data points, it’s going to weaken the dollar because of the expectation that the Fed will step in to do monetary easing.”

Kiwi Dollar

The U.S. central bank has held its key rate in a range of zero to 0.25 percent since 2008 and plans to keep it there at least through late 2014. The Fed also bought $2.3 trillion of mortgage and Treasury debt from 2008 to 2011 in two rounds of so-called quantitative easing.

The New Zealand dollar strengthened after the statistics bureau said today sales adjusted for inflation gained 1.3 percent in the three months through June. That compares with a 0.6 percent decline in the first quarter and a 0.7 percent gain estimated in a Bloomberg survey.

“This is definitely a positive number,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC) “That tells you the consumer sector is in decent health, and the kiwi got a little bit of a boost.”

The so-called kiwi dollar rose 0.1 percent to 81.02 U.S. cents. It added 0.3 percent to 63.54 yen.

To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Sharon Chen in Singapore at schen462@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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