Yen Rises Versus Euro on Monetary Policy Split

BOJ Governor Haruhiko Kuroda
Haruhiko Kuroda, governor of the Bank of Japan, will hold a press conference after the BOJ’s next policy decision on June 13. Photographer: Tomohiro Ohsumi/Bloomberg

The yen rose the most in almost a month versus the euro on speculation Bank of Japan stimulus is boosting the economy while the European Central Bank will expand currency-debasing measures to revive growth.

Japan’s currency strengthened against most of its 16 major peers, with analysts surveyed by Bloomberg News predicting the BOJ will keep stimulus at existing levels when policy makers meet June 12-13. It gained versus the euro as data pointed to subdued inflation and production in the 18-nation currency bloc. Yuan forwards had the biggest three-day gain since January 2012 as China’s central bank increased the currency’s fixing after data showed a doubling in the trade surplus for May.

“We’re going to be in for a period of euro weakness and there’s no reason why it won’t weaken against the yen as well given the policy divergence,” Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut, said in a phone interview. “The writing is on the wall a little bit for some of these euro crosses.”

Japan’s currency strengthened 0.5 percent to 138.66 per euro at 5 p.m. New York time, reaching the biggest advance since May 8 on a closing basis. The yen appreciated 0.2 percent to 102.35 per dollar. The 18-nation currency weakened 0.4 percent to $1.3547, after dropping to $1.3503 on June 5, the lowest since Feb. 6.

Winners, Losers

New Zealand’s dollar gained the most against the greenback of its 16 major peers, appreciating 0.4 percent. South Africa’s currency fell the most, declining 0.6 percent.

The South African minister who led the latest round of failed talks in a platinum strike threatening to push the country into recession said job cuts grow more likely as the 20-week pay dispute drags on. The rand fell to 10.7077 against the dollar.

The People’s Bank of China raised the reference rate by 0.06 percent to 6.1451 per dollar, the strongest since March 26.

Exports rose more than expected in May, lifting the excess in the trade account to $35.9 billion from $18.4 billion in April, a report showed on June 8. The yuan lost 2.8 percent this year in Asia’s worst performance.

BOJ Watch

BOJ Governor Haruhiko Kuroda is scheduled to hold a press conference after the BOJ’s next policy decision on June 13 amid speculation his policies are leading to an improvement in financial markets and the economy. The central bank has been buying about 7 trillion yen ($68.4 billion) of government bonds a month since April 2013. All 33 economists surveyed by Bloomberg News forecast the central bank will keep policy unchanged at the meeting.

“The economic data has been mixed but clearly not to the level that would warrant further action at this month’s meeting” of the BOJ, said Peter Rosenstreich, chief foreign-exchange analyst at Swissquote Bank SA in Geneva. “Cyclical stimulus seems to be working while, structurally, sentiment has shifted. This might indicate less artificial support from the BOJ, and that should underpin the yen.”

The yen rallied beyond the 200-day moving average of 138.68 per euro.

“It tried to get through there right around the end of May, but failed,” said Faros Trading’s Bechtel. “If it gets through there now, it could open up a lot of chart space on the technicals.”

European Economy

The euro weakened after a report showed a slower pace of inflation in the Netherlands than economists forecast in May, bolstering speculation that the ECB will persist with measures to boost the economy. Separate data showed a drop in French industrial production in April from a year ago.

ECB policy makers led by President Mario Draghi last week cut the deposit rate to minus 0.1 percent, lowered the main refinancing rate to a record 0.15 percent and announced measures including targeted long-term loans.

“The most important thing from the foreign-exchange point of view, it’s the signal that the ECB will run around with very low rates for a long time,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt.

The euro declined 1.9 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen has gained 3 percent while the dollar is down 0.3.

In the U.S., retail sales increased 0.6 percent in May following a 0.1 percent advance the previous month, the Commerce Department will say June 12, according to the median forecast of economists surveyed by Bloomberg.

“We are going to see a stronger second half” for U.S. economic growth, Federal Reserve Bank of Boston President Eric Rosengren said yesterday.

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