The euro climbed to the highest level versus the yen since 2010 as the Bank of Japan’s effort to double the nation’s monetary base within two years fueled demand for higher-yielding assets.
The shared currency gained for a fifth day against the dollar, the longest winning streak this year, and approached a key technical level as Europe’s bailout fund said a bond sale drew strong demand. The yen strengthened from the weakest level versus the dollar in almost four years on bets it fell too much, too fast, after the BOJ announced unprecedented stimulus last week. Stocks rose, and Australia’s dollar advanced.
The BOJ “has definitely been a consistent driver for the past couple of days for sure,” Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut, said in a telephone interview. “The euro is going to be looking at this $1.3146 level, which is where the 100-day moving average comes into play. We’re probably going to test that.”
Europe’s shared currency reached 130.09 yen, the strongest level since January 2010, before trading at 129.55 yen at 5 p.m. in New York, up 0.2 percent. The euro appreciated 0.6 percent to $1.3083 and touched $1.3103, the highest since March 15. The Japanese currency appreciated 0.3 percent to 99.02 per dollar after weakening earlier to 99.66, the least since May 2009.
The euro last traded above $1.3146 on March 8. Moving averages, which show momentum, are considered by some traders as potential turning points.
The 17-nation currency advanced as the European Financial Stability Facility sold 8 billion euros ($11 billion) of five-year, 0.875 percent securities to what it said in an emailed statement was “exceptionally strong demand.” The offering drew 14 billion euros in bids, according to the statement.
“That seems quite consistent with the strong performance by European bond markets in the aftermath of the Bank of Japan policy announcement” last week, Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in a telephone interview.
The most accurate Polish-zloty forecasters say a bond rally that drove yields to record lows will peter out as the currency weakens. Poland’s economy, the only one in the European Union to avoid a recession since 2009, will expand 1.2 percent this year, the slowest pace since 2001, the European Commission forecasts.
The zloty gained 0.8 percent to 3.1446 per dollar and touched 3.1377, the strongest since Feb. 25.
Malaysia’s currency gained amid optimism pro-growth policies will gain momentum following national elections due in the coming weeks, attracting global investment. The ringgit rallied 0.7 percent to 3.0365 to the greenback.
The yen appreciated after its 14-day relative strength index against the greenback dropped to 27 yesterday, below the level of 30 that some traders see as a sign an asset has fallen too quickly. It was 29.5 percent today.
BOJ officials led by Governor Haruhiko Kuroda said April 4 after a policy meeting they would boost monthly bond purchases to 7.5 trillion yen ($80 billion) and they suspended a cap on some bond holdings and dropped a limit on debt maturities.
Bank officials said they’ll switch the policy target from the benchmark interest rate to the monetary base -- cash in circulation and the money that financial institutions have on deposit at the central bank. They predicted the measure will double to 270 trillion yen by the end of 2014.
The yen slumped 22 percent in the past six months, the worst performer of the 10 developed-market currencies tracked by Bloomberg Correlation Weighted Indexes, on the government’s pledge to increase stimulus to end 15 years of deflation. The dollar gained 0.9 percent and the euro climbed 2.7 percent.
“It may be a bit of a pause for breath after a pretty large move,” Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a phone interview of the yen’s gain. “We still think the trend for a weaker yen should continue. One hundred for dollar-yen looks clearly in sight.”
Three-month implied volatility for the yen against the dollar fell to 13 percent today after climbing to 13.6 percent, the highest level since March 2011.
The Australian dollar advanced against most of its 16 most-traded peers as risk appetite rose. The Aussie strengthened 0.7 percent to $1.0489 after gaining 0.3 percent yesterday. The currency gained 0.4 percent to 103.87 yen and touched 104.36 yen, the highest since July 2008.
South Africa’s rand climbed to its strongest level versus the dollar in more than five weeks. The currency of Africa’s biggest economy appreciated as much as 0.9 percent to 8.9096 per dollar.
Thailand’s baht led Asian currencies, climbing 1 percent to 28.94 per dollar and reaching 28.92, the strongest since July 1997, as demand for the nation’s bonds rose amid the monetary easing in Japan.
Thai five-year government bond yields fell two basis points, or 0.02 percentage point, to 3.16 percent. Comparable Japanese yields rose two basis points to 0.2 percent. U.S. five-year note yields were little changed at 0.7 percent.
The Standard & Poor’s 500 Index rose 0.4 percent.