The yen weakened, trimming a weekly gain against most of its 16 major peers, as investors awaited clues on the Bank of Japan’s next move when Governor Haruhiko Kuroda speaks today.
The yen was 0.4 percent from its highest this month after the BOJ left its bond-buying program unchanged and said the economy has continued to recover moderately. Australia’s dollar was near a two-month high after reports showed retail sales and industrial production growth in China, its largest trading partner, accelerated in May. A gauge of volatility for the currency versus the greenback fell to an 18-year low.
“I don’t think Kuroda will completely rule out additional stimulus but say that it’s not really needed right now,” said Marito Ueda, senior managing director at currency-margin company FX Prime Corp. in Tokyo. “He will speak with the presumption that Japan’s economy is recovering nicely and inflation target is achievable.”
The yen weakened 0.3 percent to 101.98 per dollar as of 6:49 a.m. in London, trimming its weekly gain to 0.5 percent. It slipped 0.3 percent to 138.26 per euro from yesterday and 139.80 on June 6. The euro bought $1.3557 from $1.3552 yesterday, set for a 0.6 percent weekly decline. Europe’s common currency fell as low as 79.91 pence, the weakest since November 2012.
The BOJ will continue to expand the monetary base at a pace of 60 trillion yen ($589 billion) to 70 trillion yen per year, it said in a statement today in Tokyo, in line with estimates of all 33 economists in a Bloomberg News survey.
Signs of resilience in the economy following a sales-tax increase in April and confidence expressed by Kuroda have led a growing number of economists to delay, or abandon, calls for additional easing.
Forty-two percent of economists forecast the BOJ will boost stimulus in October, which displaced July as the most popular pick for action, according to the Bloomberg survey conducted June 3-6. Fifty-eight percent see BOJ action by the end of this year, dropping from 75 percent last month.
Japan’s Topix index added 0.5 percent today and is down 4.5 percent this year.
New Zealand’s dollar led gains among its most-traded peers this week after the Reserve Bank of New Zealand boosted the official cash rate by a quarter-percentage point to 3.25 percent yesterday, the third increase this year, and signaled more tightening to come.
RBNZ Assistant Governor John McDermott said in a Bloomberg News interview the bank expects to raise its benchmark rate by another 50 basis points this year and, while its forecasts are always conditional, “it would take more than what we can see at the moment” for it to deviate from that path. Currency traders are mis-pricing the nation’s dollar and should be taking more notice of falling commodity prices, he said.
“The new order is that U.S. rates are zero and European rates are negative, so the money is going to go where it wants to go, which is where the interest rates are,” Tim Kelleher, head of institutional foreign-exchange sales at ASB Bank Ltd. in Auckland, said yesterday. “Terms of trade and export prices might have been the fundamental way currencies traded five years ago,” he said. “Those fundamentals don’t work anymore.”
New Zealand’s currency slipped 0.2 percent to 86.67 U.S. cents after yesterday reaching 87, the highest level since May 7. It has climbed 2 percent this week, the biggest advance since the period ended Feb. 7.
Australia’s dollar was little changed at 94.16 U.S. cents, poised for a third straight weekly gain. It touched 94.38 yesterday, the highest since April 10. One-month implied volatility for the Aussie slid to 5.58 percent yesterday, the lowest since 1996.
China said today retail sales rose 12.5 percent in May from a year ago versus the previous month’s 11.9 percent rise, according to the median estimate in a Bloomberg survey. That exceeded the median estimate of economists surveyed by Bloomberg News of a 12.1 percent increase. Industrial output climbed 8.8 percent from 8.7 percent in April, in line with economists’ forecasts.
The pound extended gains from yesterday versus the euro after Fitch Ratings Ltd. affirmed the U.K.’s government bond grade at AA+, the second highest, with a stable outlook.
Bank of England Governor Mark Carney said yesterday the central bank may raise interest rates from a record low earlier than investors expect.
“There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced,” Carney said in his debut speech at the Mansion House in London yesterday. “It could happen sooner than markets currently expect.”