Photographer: Kiyoshi Ota/Bloomberg

Yen Surges to Strongest Since August 2014 as BOJ Holds Fire

  • Japan’s currency gains versus all of its 31 major peers
  • Yen is best currency in June as Brexit risk spurs haven demand

The yen climbed to its strongest level against the dollar since August 2014 after the Bank of Japan refrained from adding any stimulus that could slow its advance.

Japan’s currency gained versus all of its 31 major peers after Governor Haruhiko Kuroda and his board opted to continue to gauge the economic impact of their negative interest-rate policy ahead of an election next month. The yen is the best-performing currency globally in June as concern the U.K. will vote next week to leave the European Union fueled demand for haven assets.

The dollar extended a decline that has made it the worst-performing developed-market currency this year behind the pound, after Federal Reserve officials suggested the pace of further action will be slower than previously predicted.

Pressure has been rising for BOJ’s Kuroda to bolster stimulus given tepid economic growth and inflation nowhere near its 2 percent inflation goal.

“It is clear they are prepared to act” in coming months, said Neil Mellor, a London-based currency strategist at Bank of New York Mellon Corp., referring to the BOJ. “One of the reasons they didn’t act today was the EU referendum.”

Yen Gains

The yen climbed 1.7 percent to 104.25 per dollar as of 5 p.m. New York time after touching 103.55, the strongest level in almost two years. Japan’s currency has appreciated more than 15 percent against the greenback this year, outperforming all its developed-market peers. It gained 2 percent to 117.04 per euro.

Mellor said there was a “a distinct chance with dollar-yen performing as it has” that Japanese officials will deem it a “one-sided” move in the yen and speak of intervention.

The Swiss National Bank held rates on Thursday as it braced for Britain’s EU vote. Officials reiterated that the franc remained significantly overvalued and that currency-market intervention was still very much a possibility. The Swiss franc fell 0.2 percent to 1.08443 per euro.

The yen will probably climb against the dollar to 101 in the next four weeks as an Upper House election looms before further easing by the BOJ, according to Saktiandi Supaat, the Singapore-based head of foreign-exchange research at Malayan Banking Bhd.

‘Serious Risk’

“100 is a serious risk that’s growing by the day,” said Cliff Tan, the East Asian head of global markets research at Bank of Tokyo-Mitsubishi UFJ in Hong Kong. “Both domestic and foreign investors are giving up on the idea the government can do much to revive Japan.”

The yen’s jump comes after about a quarter of analysts surveyed by Bloomberg had predicted additional BOJ stimulus today. More than half forecast action at the July meeting.

“Further easing is still on the cards,” said Kohei Iwahara, director of economic research at Natixis in Tokyo. “The yen is already stronger than most companies feel comfortable with, and a dovish Fed could strengthen the yen further.”

Projections released by the Federal Open Market Committee Wednesday showed the number of officials who see just one rate increase in 2016 rose to six from one in the previous forecasting round in March. The U.K.’s June 23 referendum was also “one of the uncertainties that we discussed and that factored into” the decision, Fed Chair Janet Yellen said.

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