Yen Best Gainer on Stock Rout as Gundlach Objects to Minus Rates

  • Currency is the best performer against dollar this week
  • Minus rates having unanticipated currency effect: Gundlach

The yen is the world’s best-performing currency this week as Asian equities extended losses set off by disappointing trade data in China Tuesday, counteracting the Bank of Japan’s negative interest-rate strategy.

Japan’s currency has appreciated at least 1 percent against all its 31 major peers since Jan. 29, when the nation’s central bank announced a decision to charge some lenders on excess reserves. Following the Bank of Japan’s move, volatility in financial markets has boosted demand for the yen as a haven. The euro declined for a second day against the dollar before the European Central Bank holds a policy meeting Thursday where President Mario Draghi is forecast to cut the region’s negative deposit rate.

“Concern about Chinese growth deceleration was renewed by yesterday’s weak export data, and with oil and stock prices falling, the yen is attracting risk-aversion demand,” Takuya Kanda, a senior researcher at Research Institute Ltd. “Markets are nervous ahead of major central bank meetings this and next week.”

The yen was little changed at 112.57 per dollar as of 6:42 a.m. in London, having risen 1.1 percent this week. It earlier reached 112.41, the strongest since March 1. The Japanese currency climbed 0.4 percent to 123.58 per euro. The common currency fell 0.3 percent to $1.0977.

Negative rates in Europe and Japan have had the opposite of the anticipated effect on currencies, Jeffrey Gundlach, who runs the $56 billion DoubleLine Total Return Bond Fund with Philip Barack, said Tuesday during a webcast. Nearly three-quarters of economists surveyed expect the ECB to expand monthly bond purchases on Thursday, and all but one see the deposit rate being cut further below zero.

More ECB action “will drive the euro lower and sub $1.08 is certainly very possible on March 10,” said Hugh Killen, Westpac Banking Corp.’s head of trading for foreign exchange, fixed income and commodities. “The euro is still for me an interesting short.”

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