The yen rallied the most since July 2009 amid the highest volatility in a year as investors reassess the Bank of Japan’s monetary stimulus measures that pushed the currency to a four-year low last month.
Japan’s currency gained against all its most-traded peers as BOJ Governor Haruhiko Kuroda held back from extending the maturity of loans to banks as part of its unprecedented easing program. The Dollar Index fell for the longest streak since September as the International Monetary Fund said it sees the Federal Reserve maintaining monthly bond purchases until at least the end of this year. U.S. central-bank policy makers announce their next interest-rate decision on June 19.
“Markets might be questioning whether the BOJ is willing to continue to be aggressive on increasing accommodation,” said Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit, by phone from Stamford, Connecticut.
The yen strengthened 3.3 percent this week to 94.31 per dollar in New York and touched the strongest level since April 4. It reached 103.74 on May 22, the weakest since Oct. 3, 2008. Japan’s currency appreciated 2.6 percent to 125.60 per euro. The euro gained 1 percent to $1.3347.
The JPMorgan Global FX Volatility Index rose to 11.43 percent June 13, the most since June 2012. The gauge has climbed from 7.05 percent in December, which was the lowest since July 2007, and was at 10.58 percent yesterday.
Brazil’s real lost 0.9 percent versus the dollar while South Korean’s won dropped 0.8 percent as the biggest weekly losers. After the yen, the biggest gainer was New Zealand’s dollar, which added 2 percent.
Hedge funds and other large speculators decreased their bets that the yen will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers on a decline in the yen compared with those on a gain -- so-called net shorts -- was 72,906 on June 11, compared with net shorts of 82,744 a week earlier. Net shorts had reached an almost six-year high last month.
Europe’s 17-nation common currency rallied against its U.S. counterpart for the fourth-straight week, the longest stretch since September.
The euro-area economy may shrink 0.6 percent in the third-quarter and grow 0.1 percent in the last three months of the year, according to a Bloomberg survey. Gross domestic product in the currency union is estimated to contract 0.9 percent in the second quarter.
“We do think here that the euro zone is going look a little less worse in the second half of the year, but I think the market already has that priced in with the euro up at these levels,” Robert Sinche, global strategist at Pierpont Securities Holdings LLC in Stamford, Connecticut, said in a telephone interview.
Futures traders reduced net euro shorts to 7,533 on June 11 from 51,621 a week earlier, CFTC data show.
Fed policy makers meet on June 18-19 after Chairman Ben S. Bernanke said on May 22 the central bank could reduce its monthly purchases of $45 billion of Treasuries and $40 billion of mortgage-backed securities, known as quantitative easing, if the employment outlook shows sustainable improvement.
Unwinding a policy of record-low interest rates and bond-buying known as quantitative easing will be challenging even though the Fed has “a range of tools” to withdraw the stimulus, the IMF staff wrote in its annual assessment of the U.S. economy.
The Dollar Index, which Intercontinental Exchange Inc. uses to monitor the greenback against the currencies of six U.S. trade partners, fell 1.3 percent this week to 80.617, the fourth straight decline, and touched 80.50 on June 13, the lowest since Feb. 20.
The measure is forecast to rally to 85.7 by the end of the year, according to the median estimate of economists and strategists surveyed by Bloomberg.
“The secret is out that at some point the Fed is going to begin to slow their purchases,” said Pierpont Securities’ Sinche. “What the markets have come to realize is that at some point, whether they talk about it next week or September or December, tapering is going to happen.”
The yen has climbed 7.5 percent in the past month, the best performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar was down 2.1 percent and the euro has risen 1.5 percent.
Japanese markets have gyrated since the currency initially weakened when Kuroda on April 4 outstripped economist forecasts by pledging to double monthly bond purchases.
The yield on Japan’s benchmark 10-year bond fell for a second week to 0.82 percent. It has swung from an all-time low of 0.315 percent to as much as 1 percent since April 4. The Nikkei 225 Stock Average dropped into a bear market on June 13 as all shares on the gauge fell for the second time this year.
The BOJ this week kept unchanged its plan for a 60 trillion-yen ($640 billion) to 70 trillion-yen annual increase in monetary base, the central bank said after a two-day meeting ended today.
“The BOJ opted to not change monetary policy,” Daingerfield said. “That might have caught markets a bit off guard expecting the Bank of Japan to be a bit more aggressive to try and combat volatility in their domestic markets.”