Yen Falls Toward One-Month Low Before Bank of Japan Decision

  • `CPI results increase the risk the BOJ eases today:' CBA
  • New Zealand dollar surges after RBNZ keeps key rate unchanged

The yen dropped toward a one-month low against the dollar before Bank of Japan policy makers decide whether to expand stimulus Thursday.

The currency weakened versus all its Group of 10 peers as more than half the economists in a Bloomberg survey expect the BOJ to act. Consumer prices in Japan dropped more than expected in March, adding to evidence that the nation is struggling to break free of deflation. Officials at the Federal Open Market Committee skipped an interest-rate hike for the third straight meeting on Wednesday and refrained from signaling that any monetary tightening was around the corner. New Zealand’s dollar surged after the Reserve Bank kept its benchmark rate unchanged on Thursday.

“These CPI results increase the risk the BOJ eases today because the BOJ is getting further away from its 2 percent inflation target,” said Joseph Capurso, a senior currency strategist in Sydney at Commonwealth Bank of Australia. The yen will weaken once the central bank unveils a new round of easing, he said.

The yen slid 0.3 percent to 111.75 per dollar as of 10:44 a.m. in Tokyo. It touched 111.91 on April 25, the weakest level since April 1. The yen has gained more than 7 percent this year against the dollar after the BOJ’s surprise adoption of negative interest rates on Jan. 29 failed to weaken the currency.

BOJ Decision

The Bloomberg Dollar Spot Index, which measures the greenback against 10 major global peers, was little changed. The measure has declined 4.4 percent this year.

Twenty-three of 41 analysts surveyed by Bloomberg expect policy makers will expand stimulus. Nineteen analysts predict the BOJ will increase purchases of exchange-traded funds, eight expect a boost in bond buying and eight project the BOJ will lower its negative rate, the survey conducted April 15-21 shows.

“We are well on the dovish side of consensus, anticipating a significant new package of easing,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc’s securities unit, wrote in a note to clients. “Extrapolating this result onto the yen feels fraught with uncertainty. The transmission mechanism between policy easing and easier financial conditions via changes in asset prices has become more fractured of late.”

Prices excluding fresh food slumped 0.3 percent in March from a year earlier, the most since April 2013, Japan’s statistics bureau announced Thursday. That compares with a forecast drop of 0.2 percent in a Bloomberg survey.

New Zealand’s kiwi dollar climbed 0.9 percent to 69.08 U.S. cents after surging as much as 1.4 percent when RBNZ Governor Graeme Wheeler kept the official cash rate at 2.25 percent. He said in a statement accompanying the decision that further easing may be required to reach the bank’s inflation target. A lower currency would be desirable, he said.

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