Yen Rallies From 2-Week Low as BOJ Holds Asset Purchases

The yen snapped a six-day decline against the euro, the longest run of losses since March, after the Bank of Japan refrained from expanding stimulus at the end of its policy meeting today.

The Dollar Index was little changed before a U.S. Labor Department report that economists said will show payrolls expanded at a faster pace last month and the jobless rate increased. South Africa’s rand slumped to a four-month low versus the dollar amid strikes in the nation’s mining and transport industries.

“The yen is stronger because there is not another rush of yen liquidity,” said Daragh Maher, a currency strategist at HSBC Holdings Plc in London. “It won’t get much stronger ahead of the nonfarm payrolls though.”

The yen gained 0.1 percent to 102.10 per euro at 7:35 a.m. New York time after dropping 2 percent over the previous six days. Japan’s currency was little changed at 78.48 per dollar. The euro fell 0.1 percent to $1.3011 after rising to $1.3032 yesterday, the strongest since Sept. 21.

The BOJ said its bond-buying program, its main policy tool, will remain at 55 trillion yen, as forecast by all 20 economists surveyed by Bloomberg News. Japan’s Economy Minister Seiji Maehara attended today’s meeting, the first minister to do so for more than nine years. Maehara said he went to express his concern about yen appreciation and prolonged deflation.

‘Political Pressure’

“There was a sense that the new economy minister attending might increase the political pressure on the BOJ to ease in the market at least,” HSBC’s Maher said.

The yen has weakened 6.4 percent in the past 12 months, the biggest decline among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro fell 4.9 percent and the dollar dropped 2.5 percent.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 79.37, having fallen 0.7 percent this week.

U.S. employers hired 115,000 workers in September, up from 96,000 in August, according to the median estimate of 92 economists in a Bloomberg News survey. The jobless rate will climb to 8.2 percent, from 8.1 percent, a separate Bloomberg survey showed.

Fed Buying

Fed Chairman Ben S. Bernanke this week defended the central bank’s bond-buying program announced, saying officials will sustain record stimulus even after the domestic expansion gains strength. The Fed said on Sept. 13 it will keep the main interest rate near zero until at least mid-2015 and buy $40 billion of mortgage debt every month in a third round of so-called quantitative easing.

“A weaker-than-expected payrolls figure will put downward pressure on the U.S. dollar as markets start to speculate on added QE purchases,” Sireen Harajli, a currency strategist at Credit Agricole Corporate & Investment Bank in New York, wrote in a report today. “A better-than-expected figure will continue today’s increase for risk appetite.”

The rand declined for a third day against the dollar as strikes spread across the mining industry, raising concern the government will miss its fiscal targets.

“It’s just general panic-driven pandemonium,” said William van Rijn, a currency dealer at Johannesburg-based Nedbank Group Ltd. “I don’t think any of that news can be good for the rand.”

The currency fell 1.1 percent to 8.6130 per dollar after dropping to 8.6873, the lowest since June 1, and 0.2 percent from the least since May 2009. The rand has declined 3.5 percent this week.

Weekly Gain

The euro headed for its first weekly gain in three weeks against the dollar after European Central Bank President Mario Draghi said the bank was ready to start buying government bonds.

The ECB is prepared to undertake Outright Monetary Transactions “once all the prerequisites are in place,” Draghi said yesterday at a press conference in Ljubljana, Slovenia, after policy makers left the benchmark rate at a historic low of 0.75 percent.

“The ECB’s bond-buying decision has been welcomed by the markets,” said Takuya Kawabata, a researcher at Research Institute Ltd. in Tokyo. “The risk-averse trade has receded and we’re seeing a firmer euro.”

The euro may rise to $1.3031, the 61.8 percent Fibonacci retracement of its decline from a high of $1.3172 on Sept. 17 to a low of $1.2804 on Oct. 1, according to UBS AG. Momentum indicators for the currency have improved, “reflecting a bullish trend condition,” Richard Adcock, London-based head of fixed-income technical strategy at UBS, wrote in a report today.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

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