Yen Gains for 2nd Day Versus Dollar; Sweden’s Krona Rises

The yen strengthened for a second day versus the dollar amid speculation the Bank of Japan (8301)’s policy board will refrain from adding stimulus when it convenes for a two-day meeting starting tomorrow.

The Japanese currency rose against all but three of its 16 major peers even as Kikuo Iwata, one of Prime Minister Shinzo Abe’s candidates for deputy governor of the BOJ, said in parliament that the central bank must expand its monetary base and buy longer-maturity bonds. Sweden’s krona gained after a report showed the nation’s services output expanded for a second month in February. Australia’s currency climbed versus the dollar as the Reserve Bank kept interest rates on hold.

“The BOJ are not expected to do anything before leadership transition,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. The yen’s lack of reaction to Iwata’s comments “is perhaps an indication that the time for talking is now over,” he said.

The yen appreciated 0.2 percent to 93.26 per dollar as of 7:35 a.m. New York time, after gaining 0.1 percent yesterday. It strengthened 0.2 percent to 121.50 per euro, after earlier rising as much as 0.5 percent. The euro was at $1.3029.

The Swedish krona climbed to its strongest level in six months versus the euro after Stockholm-based Swedbank said an index based on responses from about 200 purchasing managers in the services industry was a seasonally adjusted 54.6 in February compared with a revised 52.6 the previous month.

The krona appreciated 0.2 percent to 8.3369 per euro, after reaching 8.3232, the strongest since Sept. 3, and gained 0.3 percent to 6.3969 per dollar.

Worst Performer

The yen weakened 11 percent in the past three months, the worst performer among 10 developed market currencies measured by Bloomberg Correlation-Weighted Indexes. It has dropped amid speculation Abe’s push to expand stimulus will debase the currency. The prime minister’s nomination for the next BOJ governor, Haruhiko Kuroda, said yesterday the central bank will do whatever is needed to end 15 years of deflation.

Sweden’s krona gained 5.9 percent, the best performer in the Bloomberg indexes.

The so-called Aussie rose from an almost eight-month low reached yesterday after Australia’s Reserve Bank left its overnight cash-rate unchanged at 3 percent today.

Governor Glenn Stevens said in a statement that growth in 2012 was led by “very large increases in capital spending in the resources sector,” while reiterating that the inflation outlook “would afford scope to ease policy further, should that be necessary.”

‘More Upbeat’

“The RBA was a little bit more upbeat on the outlook for capital expenditure and it continued to say that past easing is having an impact on the economy,” said Khoon Goh, a Singapore- based foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. (ANZ) “The market has taken Stevens’s comments on resources spending positively and that’s why we’ve seen the Aussie move higher.”

The Aussie snapped a three-day decline versus the dollar, gaining 0.3 percent to $1.0225. It dropped to $1.0115 yesterday, the lowest since July 12.

The euro was little changed against the dollar even after an index showed manufacturing and services in the 17-nation region contracted less than economists forecast in February.

A composite gauge of euro-area services and manufacturing output was 47.9 in February, versus 48.6 in January, London- based Markit Economics said in a report today. Analysts had forecast a drop to 47.3, according to the median of 19 estimates in a Bloomberg News survey.

Loosen Targets

Europe’s shared currency appreciated versus the Swiss franc as Italian bonds rose after European finance ministers meeting in Brussels yesterday said some nations may be able to loosen targets for the reduction of their deficits.

Strains “may also justify in a certain number of cases reviewing deadlines for the correction of excessive deficits,” European Union Economic Affairs and Monetary Commissioner Olli Rehn said yesterday in Brussels.

Italy’s 10-year yield slipped 10 basis points, or 0.1 percentage point, to 4.78 percent. The euro gained 0.2 percent to 1.228 francs.

Malaysia’s ringgit may strengthen through 3 per dollar by year-end for the first time since March 2012, led by a recovery in the Chinese and U.S. economies, according to CIMB Group Holdings Bhd. (CIMB)

The ringgit appreciated 0.2 percent to 3.1008 per dollar.

Bernard Dompok, Malaysia’s Plantation Industries & Commodities Minister, said today he has “no problem” with the currency’s exchange rate.

“We are relatively bullish on the ringgit,” Lee Kok Kwan, deputy chief executive officer of CIMB Group Holdings, Malaysia’s second-biggest bank by assets, said in an interview in Kuala Lumpur today. “We think the underlying real economy in China and the U.S. will be much better in 2013, compared with the last two years.”

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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