Yen Slides as BOJ Easing Spurs Bets on Further Drop

The yen approached the weakest level since May 2009 against the dollar as the Bank of Japan (8301)’s unprecedented stimulus measures aimed at ending deflation spurred bets the currency will keep depreciating.

The yen fell at least 0.2 percent versus all its 16 major counterparts on speculation central bank Governor Haruhiko Kuroda will signal his determination to pursue further quantitative easing when he speaks at a Yomiuri newspaper event on Friday. The euro strengthened for a sixth day against the dollar, the longest run since December, after French industrial output rose more than economists forecast. Australia’s dollar gained after Chinese imports increased in March.

“It’s looking increasingly inevitable that we’ll test the 100 level in the near term,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, referring to the yen against the dollar. “There’s strong conviction that the aggressive monetary-easing plan unveiled by the BOJ will reinforce yen selling pressure.”

The yen fell 0.4 percent to 99.43 per dollar at 6:43 a.m. New York time after declining to 99.66 yesterday, the weakest level since May 7, 2009. Japan’s currency dropped 0.5 percent to 130.20 per euro after weakening to 130.51, the least since January 2010. The euro gained 0.1 percent to $1.3098.

Bank of Tokyo-Mitsubishi now forecasts the yen will weaken toward 108 per dollar within 12 months following last week’s BOJ decision, Hardman said.

‘Bold’ Easing

BOJ policy makers said on April 4 they would boost monthly debt purchases to 7.5 trillion yen. They also suspended a cap on some bond holdings and dropped a limit on debt maturities. Officials next meet on April 26.

“Bold monetary easing will cause a change from deflation to inflation,” Japanese Prime Minister Shinzo Abe said today in parliament. “As a result, the yen weakens, or rather, the excessively strong yen is being corrected.” The government of the world’s third-biggest economy is not seeking to intentionally weaken its currency, Abe said.

The yen has fallen 12 percent this year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 1.2 percent and the dollar advanced 1.8 percent.

UBS AG changed its year-end forecast for the yen to 110 per dollar from an earlier prediction of 100. The currency’s weakness is only halfway through amid “strong easing” initiated by the BOJ, analysts led by London-based economist Larry Hatheway wrote today in a note to clients.

Euro Gains

The euro rose for a fifth day against the yen amid speculation the expansion of quantitative easing in Japan will encourage funds in the nation to seek greater returns abroad.

“The euro is being supported by anticipation of Japanese investors being encouraged to move towards riskier assets such as higher-yielding euro-zone debt,” Bank of Tokyo-Mitsubishi’s Hardman said.

French industrial production expanded 0.7 percent in February after a revised 0.8 percent decline in January, national statistics office Insee said. Economists forecast an increase of 0.2 percent, according to a Bloomberg News.

Euro-area industrial production grew 0.2 percent in February after a 0.4 percent decrease in January, according to a separate Bloomberg survey before the report on Friday.

Aussie Gains

Australia’s dollar rose against all but one of its 16 major peers as the increase in Chinese imports boosted the South Pacific nation’s trade prospects.

“The market is putting more focus on the fact that imports have rebounded very strongly,” said Khoon Goh, a senior strategist at Australia & New Zealand Banking Ltd. in Singapore. “Given that China imports from Australia, that is seen as benefiting Australia. Near term, there’s scope for the Aussie to go higher.”

The so-called Aussie is “defying gravity,” Treasurer Wayne Swan said today at an Economic Summit in Sydney. The currency’s strength is placing “enormous pressure” across the whole economy, he said.

The Australian dollar advanced 0.3 percent to $1.0523 after gaining 1 percent during the previous two days.

To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net

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

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