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Yen Gains as Recovery Signs Damp BOJ Easing Bets - (Bloomberg)

Posted by Chris Advincula on Jul 10, 2013 6:41:00 AM

By Lucy Meakin and Mariko Ishikawa - July 10, 2013

The yen rose the most in a month against the dollar as signs of recovery in Japan’s economy damped prospects that the nation’s central bank will ease policy further this year.

The Japanese currency gained versus the euro for a second day as the Bank of Japan began a two-day meeting and Deputy Economy Minister Yasutoshi Nishimura said the economy is picking up. The euro rose against the dollar after the European Central Bank clarified comments from Executive-Board Member Joerg Asmussen that sent the currency to a three-month low. The Dollar Index fell from near a three-year high before Federal Reserve Chairman Ben S. Bernanke is due to speak on the economy.

“The market has come to the conclusion that maybe there won’t be so much additional easing from the Bank of Japan down the line,” said Jane Foley, a senior currency strategist at Rabobank International in London. “We can go higher in dollar-yen over the medium term. We would need another bout of dollar strength to trigger that as opposed to isolated yen weakness. Whether we get that over the summer very much depends on what Bernanke says.”

Japan’s currency appreciated 1 percent to 100.13 per dollar at 10:43 a.m. London time, the steepest advance since June 14. The yen strengthened 0.8 percent to 128.26 per euro after reaching 128, the strongest since June 27. The 17-nation currency rose 0.3 percent to $1.2814 after sliding to $1.2755 yesterday, the least since April 4. 

 

BOJ Meeting

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, fell 0.3 percent to 84.358. It reached 84.753 yesterday, the highest since July 2010.

BOJ Governor Haruhiko Kuroda and his fellow policy makers will discuss upgrading their assessment of the nation’s economy by using the word “recover” for the first time in more than two years, according to people familiar with the central bank’s discussions.

Thirteen of 20 economists in a Bloomberg survey completed July 8 saw no extra easing of monetary policy by the BOJ in the next six months, a reversal from a poll in May. The International Monetary Fund upgraded Japan’s growth forecast this year to 2 percent from a 1.6 percent projection in April, citing the effects of a recent accommodative stance on confidence and private demand. 

 

Big Improvement

“Japan’s seen a pretty big improvement in its competitiveness, given how far the yen has fallen on a trade-weighted basis, and that should translate into better export performance,” said Jonathan Cavenagh, a Singapore-based currency strategist at Westpac Banking Corp. (WBC) “Those types of factors should, at the margin, be yen-supportive.”

Japan’s currency has tumbled 21 percent in the past 12 months, the worst performer among 10 developed nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as Prime Minister Shinzo Abe vowed to boost the economy through stimulus that tends to depreciate the currency. The dollar has gained 2.2 percent and the euro has strengthened 7.6 percent.

The yen advanced at least 0.3 percent against all 16 of its major counterparts.

Draghi pledged last week after an ECB policy meeting to keep borrowing costs low for an extended period. The ECB wanted to provide forward guidance in a more explicit way than it did in the past, he told reporters. The bank’s key interest rate is a record-low 0.5 percent.

The ECB said in an e-mailed statement that Asmussen didn’t intend to give guidance on rates for an exact period after Reuters reported him as saying it would go beyond 12 months. He’s due to speak in Skopje, Macedonia today. 

 

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