Yen Drops to Weakest Level Since April 2009; Aussie Dollar Rises

The yen sank to the weakest level since last trading at 100 per dollar four years ago as the Bank of Japan (8301) reiterated its stimulus program, driving investors into an array of higher-yielding assets.

Japan’s currency briefly pared losses after BOJ Governor Haruhiko Kuroda indicated policy adjustments are unlikely every month while saying the central bank will take “all necessary measures” to boost inflation. Australia’s dollar climbed after China’s imports rose. The euro fell versus the dollar as minutes showed the Federal Reserve debated the end of its stimulus.

“The effects of the BOJ announcement are obviously quite substantial,” Robert Lynch, a New York-based currency strategist at HSBC Holdings Plc, said in a telephone interview. “You’ve got yen weakness against a host of currencies.”

The yen slid 0.8 percent to 99.78 per dollar at 5 p.m. New York time and touched 99.88, the weakest level since April 14, 2009. Japan’s currency dropped 0.7 percent to 130.41 per euro and touched 130.54, the least since January 2010. The euro fell 0.1 percent to $1.3070.

Thailand’s currency rose to a 16-year high after overseas investors pumped the most money into the nation’s bonds in four weeks following monetary easing in Japan, according to Thai Bond Market Association data. The baht touched 28.87, the strongest since July 1997.

Biggest Losers

The yen and Norway’s krone were the biggest losers among the dollar’s 16 most-traded counterparts. The Nordic currency slid after an unexpected slowing in consumer-price growth raised pressure on the central bank to cut its key interest rate. The krone weakened 0.5 percent to 5.7422 to the dollar.

Australia’s currency rose against most major counterparts as China, the nation’s biggest trade partner, reported a 14.4 percent increase in imports last month, more than forecast. The Aussie dollar advanced 0.5 percent to $1.0543. It touched $1.0552, the strongest since Jan. 24.

BOJ Chief Kuroda said markets are still adjusting to the Japanese central bank’s new policies to fight deflation.

“The biggest commitment is that we will take all necessary measures,” Kuroda said at a press gathering in Tokyo today, six days after announcing unprecedented stimulus to double the monetary base over two years.

Investors are seeking a sense of what more could be in store after Kuroda unveiled plans April 4 to double bond purchases, extending the yen’s decline against the dollar to 19 percent from mid-November through today.

Investor Purchases

Japanese and investors following them may have purchased about $13.5 billion of non-Japanese bonds since the stimulus announcement, 10 times more than the previous period, according to an estimate by Societe Generale SA.

“Yen is on a downtrend, and we don’t expect that to change any time soon,” Sireen Harajli, a foreign-exchange strategist in New York at Credit Agricole SA (ACA), said in a phone interview.

The prospect of the Japanese currency weakening to 130 per dollar isn’t unreasonable, Jonathan Beinner of Goldman Sachs Group Inc. in New York said on Bloomberg Television.

That level is “not an unreasonable place to be,” Beinner, head of global fixed-income at Goldman Sachs Asset Management, which overseeing $500 billion, said in an interview on “Market Makers” with Stephanie Ruhle and Erik Schatzker. “We’re not calling for that in the near term here, but I think that’s a distinct possibility.”

The yen last touched 130 per dollar in April 2002. It last traded at 100 in April 2009.

‘Spillover Effects’

Japan’s currency declined 1.4 percent today versus New Zealand’s dollar, nicknamed the kiwi, and 0.8 percent against the pound. The greenback weakened against 10 of its 16 most- traded peers.

“The gains in the yen crosses -- euro-yen, Aussie-yen, even sterling-yen, kiwi-yen -- they’re helping those currencies also move higher against the dollar,” HSBC’s Lynch said. The “spillover effects the cross-yen trade has had on the dollar majors” are helping keep the U.S. currency weaker, he said.

A technical gauge indicated the yen may change direction against the dollar. The Japanese currency’s 14-day relative- strength index versus the greenback was at 27.6 today, its third straight day below the level of 30 that some traders see as a sign an asset has fallen too quickly.

Since the BOJ’s announcement, the yen has appreciated on only one day versus the dollar, gaining 0.3 percent yesterday.

The yen has fallen 12.7 percent this year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 1 percent and the dollar advanced 2 percent.

FOMC Minutes

Minutes released of the Federal Open Market Committee meeting last month showed several members said they “thought that if the outlook for labor-market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end.”

The U.S. central bank is buying $85 billion of Treasury and mortgage debt each month to spur economic growth until it sees significant improvement in the labor market.

The March 19-20 meeting took place before the Labor Department reported last week that U.S. payrolls grew by 88,000 workers in March, less than half the forecast in a Bloomberg survey and the least in nine months.

The euro rose for a fifth day against the yen, the longest winning streak this year, amid speculation Japan’s stimulus 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 toward riskier assets such as higher-yielding euro-zone debt,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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