The yen climbed to the strongest in more than two weeks against the euro as Group-of-20 officials begin talks in Moscow, fueling speculation they may criticize Japanese policies that have helped weaken the currency.
The yen gained for a fourth day versus the dollar as investors speculated the next Bank of Japan governor may be the candidate who is the least aggressive on monetary stimulus. The euro declined after data yesterday showed recession in the currency bloc deepened at the end of last year. Sweden’s krona depreciated against all of its 16 major peers.
“What we’re seeing right now is a bit of a fright with the G-20 meeting happening in Moscow,” said Sonja Marten, a currency strategist at DZ Bank AG in Frankfurt. “The trend is going to resume and dollar-yen is going to go back up, quite possibly next week, once the G-20 is behind us.”
The yen appreciated 0.5 percent to 123.49 per euro at 7:06 a.m. New York time after touching 122.90, the strongest since Jan. 30. It gained 0.2 percent to 92.68 versus the dollar. The 17-nation common currency dropped 0.3 percent to $1.3326, after sliding to $1.3311, the least since Jan. 24.
G-20 finance ministers and central bankers meeting in the Russian capital will reaffirm a pledge to “refrain from competitive devaluation” and commit to monitoring “possible monetary-policy spillover,” according to a draft statement obtained by Bloomberg and dated Feb. 11.
“The yen is being bought as the market remains cautious about statements from the G-20 about currency policies,” said Masato Yanagiya, the head of currency and money trading in New York at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-biggest financial group by market value. “There may be some criticism about the pace of the yen’s depreciation.”
Russian Deputy Finance Minister Sergei Storchak said today that the communique won’t include the words “currency war,” and Russia won’t issue a separate statement on Japan.
The premium for one-month options granting the right to sell the yen versus the dollar relative to those allowing for purchases dropped to 0.205 today, the least since Oct. 31 according to data compiled by Bloomberg. The risk-reversal rate rose to a 1.068 percentage-point premium for yen puts earlier this month. A put option gives the right, but not the obligation, to sell a currency.
The yen headed for a second weekly gain versus the euro after Reuters reported that former BOJ Deputy Governor Toshiro Muto is the leading contender to become the next central bank chief, citing people close to the selection process.
BOJ Governor Masaaki Shirakawa, criticized by politicians for not doing enough to end deflation, said last week he’ll step down on March 19, about three weeks before his five-year term is due to end. Prime Minister Shinzo Abe is close to choosing his nominee for the top BOJ post, and the decision may come in a few days, Reuters reported.
“Muto is perceived as not as dovish as some of the candidates, so that’s weighing on dollar-yen,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. “A significant amount of the yen’s decline has been in not so much what the BOJ has done in the period but what they’re expected to do in the next year or two.”
Other candidates to replace Shirakawa may include Asian Development Bank President Haruhiko Kuroda and former BOJ Deputy Governor Kazumasa Iwata.
Japan’s currency has tumbled 15 percent in the past three months, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar declined 1.3 percent and the euro rose 3.3 percent.
The 17-nation common currency fell after reports yesterday signaled that the region’s recession deepened more than forecast last quarter. Gross domestic product fell 0.6 percent in the fourth quarter from the previous three months, the European Union’s statistics office said, the worst performance since the first quarter of 2009.
“Economic growth in Europe is not strong,” said Sumitomo Mitsui’s Yanagiya. “The euro is vulnerable to the downside.”
European Central Bank Governing Council member Jens Weidmann today said a rising euro alone won’t trigger interest-rate cuts.
Sweden’s central bank Governor Stefan Ingves said Feb. 13 that the krona’s appreciation has brought it to an appropriate level and predicted the currency’s exchange rate will probably remain where it is.
The krona weakened 0.5 percent to 6.3461 per dollar. It fell 0.2 percent to 8.4546 per euro. It has climbed 8.1 percent since the start of the last year against the U.S. currency.
The Riksbank’s interest-rate policy is “unfortunate” for the nation’s exporters and employment as it is encouraging a strong krona, Sverker Martin-Loef, chairman of Swedish companies including SSAB AB and Industrivaerden AB, said in an interview with Dagens Industri.