The yen probably won’t gain more than another percentage point or two versus the dollar before reversing course as the Bank of Japan (8301) moves closer to open-ended asset purchases, according to Citigroup Inc.’s Greg Anderson.
The Japanese currency rose the most in eight months today after the central bank said it will conduct open-ended asset purchases starting in January 2014, disappointing investors who expected bolder action sooner, and doubled its inflation target to 2 percent. Prime Minister Shinzo Abe, who took office last month, is pushing to boost the economy and has called for “bold monetary policy” to defeat deflation and drive the yen lower.
“The Abe administration painted the Bank of Japan in a box with the 2 percent inflation target,” Anderson, head of Group 10 currency strategy at Citigroup in New York, said on Bloomberg Television’s “Lunch Money” in an interview. “The BOJ’s way of resisting was pushing asset purchases off until 2014.”
The yen has lost 12 percent against the greenback over the past six months. It gained 1 percent to 88.74 per in New York today and rallied as much as 1.4 percent, the most since May 17.
While the yen may strengthen to 87 per dollar over the next two weeks, it will weaken to the mid-90s versus the dollar by year-end, Anderson said.
“Once they actual begin expanding balance sheet, you will see the yen weaken further,” he said.
The bank said today it will buy 13 trillion yen ($146.6 billion) in assets a month starting next year.
BOJ Governor Masaaki Shirakawa is scheduled to conclude a five-year term in April, and the terms of his two deputies end in March, giving Abe’s government a chance to chance to reshape the central bank.
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