Yen Weakens on BOJ Easing Bets, Panasonic Loss Forecast

The yen weakened against all of its 16 major counterparts before the Bank of Japan (8301) releases minutes tomorrow of its Oct. 4-5 meeting amid speculation the central bank will ease monetary policy further.

The Japanese currency fell for a third day versus the euro after Panasonic Corp. (6752) forecast the second-biggest loss in company history, fanning speculation the nation’s trade deficit will worsen. Australia’s dollar was near a two-week high after Chinese data showed manufacturing improved in the world’s second-largest economy. Implied volatility among Group-of-Seven currencies held near a five-year low.

“Expectations of additional monetary easing by the BOJ still remain in the markets,” said Shinji Kunibe, chief portfolio manager for fixed-income investment in Tokyo at Nissay Asset Management Corp., which oversees the equivalent of $65 billion. “Considering the terrible earnings in the electronics sector and the prospect of a widening trade deficit, I can’t help thinking the era of yen weakness will come sooner than we thought.”

The yen dropped 0.2 percent to 103.53 per euro as of 7:23 a.m. in London after losing 0.4 percent in the past two days. The Japanese currency slid 0.3 percent to 80.01 per dollar. The 17-nation euro slid 0.2 percent to $1.2932.

BOJ Outlook

The BOJ increased its asset-purchase program on Oct. 30 by 11 trillion yen ($137 billion) to 66 trillion yen to bolster growth through lower borrowing costs. In the previous meeting earlier that month, the central bank avoided adding to stimulus.

Panasonic, Japan’s second-biggest TV maker, scrapped its profit forecast yesterday, saying the net loss may total 765 billion yen in the year ending March 31. Nintendo Co., the world’s largest maker of video-game machines, cut its full-year net income projection last week by 70 percent, citing a stronger yen.

Japan’s imports exceeded exports by 3.22 trillion yen in the six months ended Sept. 30, the biggest trade deficit for a fiscal half-year period, the Ministry of Finance said on Oct. 22. The nation posted a shortfall in September for a third- consecutive month.

The JPMorgan G7 Volatility Index, calculated based on premiums on currency options, was at 7.53 percent after touching 7.46 percent yesterday, the lowest since October 2007. The yen has weakened more than 6 percent since reaching the record high of 75.35 per dollar a year ago.

Risk Hedge

“In the current low volatility environment, we suggest Australian, New Zealand and European-based importers of Japanese products consider protection to hedge the risk of a lift in the yen and yen volatility while it is still relatively inexpensive,” Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia (CBA), wrote in a research note today.

Official figures today showed that a Chinese manufacturing gauge based on a survey of purchasing managers climbed to 50.2 in October from 49.8 in September. That matched the median estimate of economists surveyed by Bloomberg News.

A separate measure by HSBC Holdings Plc and Markit Economics was at 49.5 in October, higher than both the preliminary reading of 49.1 reported Oct. 24 and the 47.9 level for September. For both indexes, 50 is the dividing line between contraction and expansion.

“We’ve been seeing a pickup in the Chinese economy,” said Takuya Kawabata, an analyst at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin company. “The improved sentiment about China can create upward pressure” for the Australian dollar.

The so-called Aussie traded at $1.0360 from $1.0376 after climbing as much as 0.3 percent to $1.04 yesterday, the strongest since Oct. 18.

Moving Averages

The Aussie’s 200-day moving average of $1.0340 and 55-day moving average of $1.0354 are serving as a base for a potential attempt to climb above the $1.04 resistance, analysts led by Selena Ling at Overseas-Chinese Banking Corp. in Singapore wrote in a research note today. Resistance refers to an area on a chart where sell orders may be clustered.

The Swiss National Bank said yesterday the euro accounted for 48 percent of its foreign-exchange reserves at the end of the third quarter, down from 60 percent the previous quarter. The central bank imposes a limit on the franc at 1.20 per euro to keep the local currency weaker and protect exporters.

The gain in the euro following the central bank’s release suggests “investors were anticipating the selling pressure from the SNB to ease from here,” Valentin Marinov, head of European Group-of-10 foreign-exchange strategy at Citigroup Inc. in London, wrote in a research note yesterday.

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.