Yen Falls Third Day as BOJ Easing Pledge Reiterated; Real Climbs

The yen weakened for a third day against the euro after Deputy Governor Kikuo Iwata reiterated the Bank of Japan’s commitment to unprecedented monetary easing that tends to debase the currency.

The yen fell versus most of its major peers as Iwata said the central bank, which meets Oct. 31, will keep buying bonds until it achieves its 2 percent inflation target. The euro slipped against the dollar as a technical indicator signaled the shared currency may have gained too much, too fast. Brazil’s real and New Zealand’s dollar climbed.

“We’ve had some dovish commentary ahead of the Bank of Japan policy meeting, which has weakened the yen,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank’s TD Securities unit in Toronto, said by phone. “They’re just trying to give dollar-yen a bit of a nudge up.”

The Japanese currency declined 0.1 percent to 134.64 per euro at 5 p.m. New York time after depreciating to 135.51 on Oct. 22, the weakest level since November 2009. The yen lost 0.3 percent to 97.68 per dollar. The euro slipped 0.1 percent to $1.3785 after advancing on Oct. 25 to $1.3832, the strongest since November 2011.

JPMorgan Chase & Co.’s Group-of-Seven FX Volatility Index touched 7.48 percent, the lowest level since Dec. 21. The gauge has averaged 9.4 percent this year and reached 11.96 in June.

Real, Kiwi

Brazil’s real gained versus all of its 16 most-traded counterparts as a central bank auction extended maturities on currency swaps that helped fuel the world’s biggest two-month rally. It appreciated 0.4 percent to 2.1789 per dollar.

The New Zealand dollar advanced versus its U.S. counterpart before a report economists said will show manufacturing grew at the fastest pace in 18 months in China, the South Pacific nation’s biggest trading partner. The kiwi, as the currency is nicknamed, gained 0.3 percent to 83.02 U.S. cents.

Malaysia’s ringgit rose versus all 31 of its most-traded counterparts as Prime Minister Najib Razak announced a goods and services tax to help cut the fiscal deficit. The currency appreciated 1 percent to 3.1265 per dollar after touching 3.1237, the strongest level since June 17.

The Swedish krona dropped versus all of 16 major peers after the country’s retail sales rose 0.2 percent in September, versus 0.4 percent a month earlier, falling short of the median economists’ estimate of 0.5, according to a Bloomberg survey. The currency weakened 0.4 percent to 6.3450 per dollar and declined 0.3 percent to 8.7465 per euro.

Fed Meeting

The greenback gained versus most major currencies as the Federal Reserve prepared to open a two-day meeting tomorrow. The central bank will delay slowing its $85 billion of monthly bond buying under the quantitative-easing stimulus strategy until March, according to economists surveyed by Bloomberg on Oct. 17-18. The Fed’s purchases, made to push down long-term yields and spur growth, tend to debase the greenback.

The Bank of Japan buys more than 7 trillion yen ($71.7 billion) in bonds each month to spur economic growth. The country’s monetary and fiscal policies are at a critical point for ending deflation, Iwata said.

Japanese Prime Minister Shinzo Abe is attempting to revitalize his nation’s economy through a program of monetary easing, fiscal stimulus, and structural reforms -- the so-called three arrows of Abenomics.

“We know the BOJ will do everything it can to defend that 2 percent target and obtain that objective,” Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York, said in a telephone interview. “We still view the dollar-yen as moving higher, and the BOJ’s policy is one reason why.”

Technical Level

The yen fell against the dollar today after failing to maintain gains above a key technical level. The yen closed at 97.42 per dollar on Oct. 25, weaker than its 200-day moving average of 97.35, after touching a two-week high of 96.94.

The Japanese currency will end the year at 100 per dollar, and then weaken to 110 by Dec. 31, 2014, according to the median estimates of analysts surveyed by Bloomberg.

The yen tumbled 20 percent in the past year, the worst performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 0.4 percent, while the euro, the biggest winner, strengthened 8.1 percent.

The euro’s 14-day relative strength index against the dollar was at 72, the fifth straight day above the 70 threshold that indicates it may have gained too much, too fast and be due for a reversal. It was the longest stretch since September 2012.

Currency Options

Trading in over-the-counter foreign-exchange options totaled $26.4 billion, from $40 billion on Oct. 25, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $6 billion, the largest share of trades at 23 percent. Options on the euro-dollar rate totaled $5.2 billion, or 20 percent.

Euro-greenback options trading was 60 percent more than the average for the past five Mondays at a similar time in the day, according to Bloomberg analysis. Dollar-yen options trading was 0.2 percent above average.

Before it's here, it's on the Bloomberg Terminal.