The yen fell as Tokyo’s winning bid to host the 2020 Olympics boosted optimism in Japanese Prime Minister Shinzo Abe’s package of fiscal and monetary policies that have helped weaken the currency 13 percent this year.
The yen dropped against all of its major peers as a report showed the nation’s economy expanded faster than initially estimated. Australia’s dollar touched a three-week high and the South Korean won climbed to the highest level since May after a report showed China’s exports increased, boosting demand for higher-yielding assets. The dollar was little changed versus the euro amid expectations the Federal Reserve will reduce its $85 billion in monthly bond purchases this month.
“There’s been a lot of talk about the Olympics, the Chinese trade numbers and the better growth data for Japan,” said Jane Foley, senior currency strategist at Rabobank International in London. “However, before we can expect the yen to hold a move above 100, we are going to need to see a bit more dollar strength.”
The yen depreciated 0.4 percent to 99.54 per U.S. dollar at 7:03 a.m. New York time. It reached 100.23 on Sept. 6, the weakest level since July 25. Japan’s currency dropped 0.5 percent to 131.33 per euro. The dollar traded at $1.3193 per euro after advancing 0.3 percent last week.
The yen will trade at 105 per dollar in 12 months, Rabobank’s Foley said.
Abe said yesterday in a televised press conference that the games would have “good effects on a wide range of areas such as infrastructure and tourism.” For Abe, who inherited the Olympic bid when he won a landslide election in December, the games may bolster his effort to drive the economic recovery by taming deflation and boosting consumer confidence.
The yen tends to strengthen during periods of financial and economic turmoil because Japan isn’t reliant on foreign capital to fund its deficits, making it a haven. Conversely, the currency often weakens amid positive economic news on expectations investors will shift to higher-yielding assets.
The MSCI Asia Pacific Index of shares rose for an eighth day, climbing 1.4 percent today, and Japan’s Topix Index (TPX) jumped 2.2 percent.
“Victory for Tokyo’s Olympics bid is seen as helping to renew faith in Abe and his efforts to reflate the economy,” said Mike Jones, a currency strategist in Wellington at Bank of New Zealand Ltd. “That’s weighing on the yen.”
Japan’s gross domestic product rose an annualized 3.8 percent in the second quarter from the previous three months, compared with a preliminary estimate of 2.6 percent, the Cabinet Office said in Tokyo today.
The yen has depreciated 9.8 percent this year, according to Bloomberg Correlation-Weighted Indexes. The dollar and the euro are up 5.1 percent.
Australia’s dollar, which is down 8.3 percent this year, strengthened after data showed exports rose more than expected in China, its biggest trading partner. Overseas shipments rose 7.2 percent in August from a year earlier, the General Administration of Customs said in Beijing yesterday. That compares with the 5.5 percent median estimate of economists surveyed by Bloomberg and July’s 5.1 percent gain.
China’s consumer prices rose 2.6 percent last month from a year earlier, the Beijing-based National Bureau of Statistics said today, matching the median economist estimate in a Bloomberg poll. Premier Li Keqiang is seeking to keep price gains within 3.5 percent this year.
“Modest inflation pressure leaves ample room for policy makers to continue focusing on fine-tuning measures to maintain steady growth,” HSBC Holdings Plc China economists Qu Hongbin and Ma Xiaoping wrote in a research note.
The Aussie dollar rose 0.2 percent to 92.03 U.S. cents after touching 92.24, the strongest since Aug. 19. South Korea’s won advanced as much as 0.6 percent to 1,086.69 per dollar, the strongest level since May 9.
The U.S. dollar advanced against the euro last week as a government report showing job growth was weaker than forecast wasn’t enough to derail economists’ expectations that the Federal Reserve will pare its stimulus plan this month.
The Fed will taper its monthly bond purchases to $75 billion from the current $85 billion pace at its Sept. 17-18 meeting, according to the median estimate of 34 economists surveyed by Bloomberg News on Sept. 6.
The U.S. central bank will keep purchases of mortgage-backed securities at the current $40 billion per month pace, while cutting Treasury bond buying to $35 billion per month, from $45 billion, economists said. Last month, analysts estimated the Fed would reduce purchases to $35 billion in MBS and $40 billion in Treasuries.
U.S. payrolls rose by 169,000 last month, less than the 180,000 estimate in a Bloomberg survey, Labor Department figures showed on Sept. 6. That followed a revised 104,000 increase in July that was smaller than initially estimated.
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