Yen Gains, Halting 2-Day Drop, as Traders Await Stimulus Details

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  • Currency rises against all but one of its 16 major peers
  • Yen’s decline had been ‘quite rapid’: Mizuho’s Suzuki

The yen gained, rallying from its biggest two-day slide versus the dollar since 2014, as traders awaited the details of new stimulus, three days after Prime Minister Shinzo Abe increased his majority in elections and vowed to step up the fight against deflation.

Japan’s currency strengthened against all but one of its 16 major counterparts as advances in equity markets that pushed valuations to levels reached before Britain’s decision to leave the European Union slowed. Optimism that there would be immediate fiscal and monetary stimulus was dented after Chief Cabinet Secretary Yoshihide Suga told reporters the government wasn’t considering so-called helicopter money as stimulus. The Sankei newspaper reported that officials are considering direct money transfers as a policy option.

“So far we haven’t had any firm details of a fiscal stimulus package and it’s also not at all clear we are yet moving toward a helicopter-money type of scenario,” said Alvin T. Tan, a London-based foreign-exchange strategist at Societe Generale SA. “That’s taken the shine off the rally in dollar-yen.

The yen appreciated 0.3 percent to 104.43 per dollar as of 10:24 a.m. London time. It slid about 4 percent in the previous two days, reaching 104.99 on Tuesday, the weakest level since June 24. Japan’s currency gained 0.3 percent to 115.48 per euro, after tumbling 1.8 percent a day earlier.

For a QuickTake explainer on helicopter money, click here.

Japan’s currency slumped Tuesday to levels last seen before the result of the Brexit referendum. Local shares rallied with global counterparts on the prospect of fiscal stimulus, while the swift succession of Theresa May as Britain’s next prime minister removed one level of political uncertainty, curbing haven demand.

“Dollar-yen is facing some selling pressure as the move back towards 105 yen was quite rapid,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo. “There is selling pressure from Japanese near the lower-range of their currency forecast range of 105-110, halting dollar-yen’s rise above 105.”