Yen Gains as Stimulus Seen Failing to Spur Growth

The yen strengthened after reaching a four-week low versus the dollar as investors speculated the Bank of Japan (8301)’s unexpected monetary stimulus expansion will do little to augment economic growth.

The yen gained against almost all of its 16 most-traded counterparts even after policy makers added 10 trillion yen ($127 billion) in stimulus, following measures by the Federal Reserve and European Central Bank this month. South Africa’s rand tumbled even as platinum miners agreed to return to work following a strike. New Zealand’s dollar declined after the current account deficit widened to the most in three years.

“It seems like the scale was a little more aggressive than what people were expecting, so you had a little knee-jerk reaction of the yen weakening,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. “As people began to chew on it a little more, everyone is easing right now. With the large move that we saw overnight, you could be seeing some fiscal half-year repatriation happening.”

The yen rose 0.6 percent to 78.38 per dollar at 5 p.m. New York time after depreciating to 79.22, the weakest level since Aug. 22. Japan’s currency gained 0.5 percent to 102.28 per euro. It fell to 103.86 on Sept. 17, the lowest since May 9. The 17- nation shared currency was little changed at $1.3049 after dropping as much as 0.4 percent to $1.2993.

Yen Strength

The yen has appreciated 6.4 percent during the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar dropped 1.2 percent and the euro fell 2.6 percent.

The Japanese central bank’s decision to enlarge its asset- purchase fund to 55 billion yen was forecast by five of 21 economists surveyed by Bloomberg News. The bank kept its benchmark interest rate between zero and 0.1 percent.

The yen’s losses were erased with Japanese companies probably taking advantage of weaker price levels to purchase the currency, according to Greg Anderson, the North American head of G-10 currency strategy at Citigroup Inc. in New York.

The average in the past year is 78.81 per dollar, 3.8 percent stronger than the 82 yen per dollar level were Japanese exporters can remain “profitable,” a Cabinet Office survey showed in February.

Vice Finance Minister Takehiko Nakao told reporters in Tokyo on Sept. 13 the recent surge in the yen against the dollar has been “obviously speculative” and that Japan can’t overlook such moves.

Current Account

New Zealand’s dollar declined 0.1 percent to 82.67 U.S. cents before a report on the nation’s GDP, which grew at the fastest pace in five years last quarter. A separate report today showed the nation’s current account deficit was 4.9 percent, compared with a revised 4.5 percent in the 12 months through March and the 5.2 percent median forecast in a Bloomberg News survey.

The Dollar Index (DXY) fell 0.2 percent to 79.115, declining for the first time in three days.

The U.S. dollar was net-purchased today for the first time in 12 trading sessions, according to Bank of New York Mellow client data. Inflows into the euro “continue to decelerate steadily” as “structural concerns related to the euro-zone debt crisis have re-surfaced,” Samarjit Shankar, a managing director for the foreign-exchange group in Boston at Bank of New York Mellon, wrote to clients today.

The euro’s 14-day relative strength index versus the dollar fell below the 70 level for the first time in six days, the longest streak since May 2011. The 70 level indicates an asset may be “overbought,” having risen too far, too quickly and is due for a correction.

Goldman Exits

Goldman Sachs Group Inc. ended a trade recommendation to buy the euro against the dollar. The shared currency rallied 3.3 percent against the dollar since Sept. 6 when ECB President Mario Draghi said policy makers agreed to an unlimited bond- purchase program to regain control of interest rates.

“With much of the expected developments now past us, our initial target of $1.30 reached and a period of further consolidation possible, we consider it prudent to close our recommendation for a potential gain of about 7 percent,” Goldman Sachs foreign-exchange analysts led by London-based Thomas Stolper wrote today in an e-mailed report.

South Africa’s rand fell against its major counterparts as violence continued at platinum mines even after an illegal strike ended at Lonmin Plc (LMI)’s Marikana site.

The rand sank 1.1 percent to 8.2727 per dollar.

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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