Yen Set for Best Month Since '08 as Traders Wait for G-20 Action

  • Risk of further yen gains if G-20 outcome disappoints: RBS
  • Pound heads for worst week since 2010 on `Brexit' concerns

The yen headed for its biggest monthly advance since the global financial crisis as investors as Group of 20 policy makers gathered in Shanghai.

The yen has climbed 7.5 percent against the dollar in February, outperforming all its major peers amid concern about slowing Chinese growth and an uneven U.S. recovery. A gauge of currency volatility surged to its highest level since 2011 this month. The pound headed for its biggest weekly drop since the flash crash of May 2010 as the U.K. prepares to vote on whether to leave the European Union.

German Finance Minister Wolfgang Schaeuble said Friday he opposes any G-20 fiscal stimulus package and that space for monetary policy seems to be exhausted, buoying the euro. U.S. Treasury Secretary Jacob J. Lew had previously said not to expect “a crisis response in a non-crisis environment,” even with stock markets globally tumbling nearly 10 percent this year.

“The risk is that investor sentiment is disappointed by the meeting’s outcome, leading to renewed strength of the yen,” said Mansoor Mohi-uddin, a senior markets strategist in Singapore at Royal Bank of Scotland Group Plc. “Lew has already played down the possibility of any coordinated action.”

The yen gained 0.3 percent to 112.71 per dollar as of 6:51 a.m. in London from Thursday. It reached 110.99 on Feb. 11, the strongest level since Oct. 31, 2014, when the Bank of Japan expanded its quantitative easing program. The eurorose 0.3 percent to $1.1053.

G-20 Focus

“The G-20 should mostly result in commentary designed to boost risk sentiment,” said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland. “However, we do not expect any agreement or unified statements related to individual currencies.”

The pound added 0.1 percent to $1.3972. For the week, it has tumbled 3 percent -- the most since a 3.1 percent drop in the five days to May 7, 2010. It has fallen 1.9 percent this month, the only currency to decline against the greenback among Group-of-10 peers.

New Zealand’s kiwi dollar climbed 0.5 percent to 67.59 U.S. cents, advancing for a third day, after the nation unexpectedly posted its first trade surplus in eight months in January, driven by exports outside the troubled dairy industry.

While signaling there won’t be a massive global effort to stem financial-market turbulence, Lew said the G-20 could strengthen its pledge to refrain from competitive devaluations. Japanese Finance Minister Taro Aso said Friday that policy makers must cooperate to prevent a currency war.

“In market terms, keeping the previous language would be very disappointing and would be viewed as either complacent or reflecting policy paralysis,” Steven Englander, Citigroup Inc.’s head of currency strategy for major developed economies, wrote in a report Thursday. “Neither would be good at this stage.”

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