Yen Falls After BOJ’s Iwata Repeats Easing Pledge; Aussie Climbs

The yen weakened for a third day against the euro after Deputy Governor Kikuo Iwata reiterated the Bank of Japan’s commitment to unprecedented monetary easing.

Japan’s currency fell versus all its 16 major counterparts on speculation policy makers meeting this week will say they plan to keep buying more than 7 trillion yen ($71.7 billion) in bonds each month to counter deflation. The euro approached a two-year high against the dollar before the Federal Reserve starts a two-day meeting tomorrow, with economists saying policy makers will refrain from tapering stimulus. The Australian and New Zealand dollars strengthened as Asian shares advanced.

“The Bank of Japan, the Fed and the Bank of England are still effectively printing money, and the ECB is not,” said Derek Mumford, a director at Rochford Capital, a foreign-exchange risk-management company in Sydney, referring to the European Central Bank. “I still think the yen will weaken.”

The yen fell 0.2 percent to 134.77 per euro at 8:38 a.m. London time after depreciating to 135.51 on Oct. 22, the weakest level since November 2009. Japan’s currency dropped 0.2 percent to 97.59 per dollar. The euro gained 0.1 percent to $1.3811 after advancing to $1.3832 on Oct. 25, the strongest since November 2011.

The BOJ will continue to buy bonds until it achieves its 2 percent inflation target, Deputy Governor Iwata said yesterday in Shimonoseki, western Japan. The country’s monetary and fiscal policies are at a critical point for ending deflation, he said. Policy makers meet on Oct. 31.

Three Arrows

Japan’s Prime Minister Shinzo Abe is attempting to revitalize the nation’s economy through a program of monetary easing, fiscal stimulus, and structural reforms -- the so-called three arrows of Abenomics.

“We still remain firmly in the camp that the yen will weaken, and weaken materially in the months ahead,” John Horner, a currency strategist at Deutsche Bank AG in Sydney, said in a Bloomberg Television interview. “We do think Abenomics will work. We do expect to see further indication as to the detail of those reform measures in the weeks and months ahead that will give us greater confidence that that dollar-yen move will persist.”

Japan’s currency will end the year at 100 per dollar, and then weaken to 110 by Dec. 31, 2014, according to the median estimates of analysts surveyed by Bloomberg.

The yen has tumbled 20 percent in the past year, the worst performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 0.5 percent and the euro strengthened 8 percent.

French Confidence

The euro held gains from last week against the dollar before a report tomorrow that economists said will show consumer confidence in France, Europe’s second biggest economy, increased to 86 this month, matching the highest level this year that was set in February.

“The surprises that have come from Europe, that along with capital inflows to Europe, have really benefited the euro,” Mitul Kotecha, head of foreign-exchange strategy at Credit Agricole SA (ACA) in Hong Kong, said in a Bloomberg Television interview. “Once we start getting to $1.38 and above, it becomes a bit more tenuous.”

The Australian and New Zealand dollars rose before a report this week forecast to show manufacturing grew at the fastest pace in 18 months in China, the biggest trading partner of both South Pacific nations.

The National Bureau of Statistics and China Federation of Logistics and Purchasing will say their Purchasing Managers’ Index (CPMINDX) rose to 51.2 in October, according to the median estimate of economists surveyed by Bloomberg before the data on Friday.

“The Australian dollar’s benefited from some better numbers out of China,” Credit Agricole’s Kotecha said. “Whether we get back to parity anytime soon, I think, is doubtful. I think Aussie looks now to be a little bit more stretched.”

The Aussie rose 0.3 percent to 96.08 U.S. cents and the kiwi gained 0.3 percent to 83.06 U.S. cents.

The MSCI Asia Pacific Index of shares climbed 1 percent and the Europe Stoxx 600 Index gained 0.2 percent.

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net

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

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