Yen Heads for Biggest Weekly Loss in 17 Years on Stimulus Bets

Updated on
  • Bernanke said to have suggested perpertual bonds in Japan
  • Credit Agricole may review forecast if more stimulus added

Olivier Blanchard: We Are Not in a Currency War

The yen slid against the dollar, heading for its biggest weekly drop since 1999, as investors awaited the details of Japanese Prime Minister Shinzo Abe’s recharged stimulus plans following his election victory.

The currency slipped against most of its 16 major counterparts, falling after Ben S. Bernanke, the former chairman of the Federal Reserve who met officials in Tokyo this week, was reported to have floated the idea of the nation issuing perpetual bonds. Officials on Wednesday denied a Sankei newspaper report that they’re considering the policy known as helicopter money -- direct financing of government spending by the central bank.

The prospect of stimulus to speed up the fight against deflation sapped demand for haven assets this week, boosting stocks and weakening the yen. Appetite for higher-yielding investments ramped up as the Bank of England’s first policy decision since Brexit saw officials signal more stimulus in August, even as they refrained from an anticipated rate cut.

“We’re bearish on the yen,” said Vassili Serebriakov, foreign-exchange strategist at Credit Agricole SA in New York, in an interview on Bloomberg Television. “Our target is fairly moderate right now, around 110, 112 for the time being, but we are standing ready to review those forecasts if indeed the stimulus materializes.”

The yen slid 0.8 percent to 105.35 per dollar as of 5 p.m. New York time, pushing its drop since the end of last week to 4.6 percent. It earlier depreciated to 105.94, the weakest level since June 23 -- the day Britain’s decision to quit the European Union was announced. Japan’s currency slid for a fourth day versus the euro, dropping 1.1 percent to 117.14.

Signs that policy makers from Tokyo to London would respond with stimulus to prevent a Brexit-driven slowdown pushed the yen down against all of its 31 major peers in the past week. Declines accelerated after Abe increased his majority in last weekend’s upper house election, winning a fresh mandate to put life into efforts to boost consumer prices and economic output.

“The expectations of a two-pronged stimulus approach -- both fiscal and monetary -- have definitely put the yen under pressure,” said Peter Dragicevich, a foreign-exchange strategist at Commonwealth Bank of Australia in London.