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Yen Falls on Japan Trade Data, BOJ Comments; Aussie Snaps Gain - (Bloomberg)

Posted by Chris Advincula on Oct 21, 2013 4:27:00 AM

The yen fell against all of its 16 major peers after Japan’s export growth slowed and the central bank governor reiterated his commitment to monetary easing.

The currency snapped a two-day gain against the dollar as Asian stocks rose and Bank of Japan Governor Haruhiko Kuroda pledged to continue stimulus to achieve stable inflation. The greenback traded near the weakest since February before data forecast to show U.S. unemployment held above the threshold for the Federal Reserve to start tapering its bond purchases. Australia’s dollar halted an eight-day advance.

“The yen is probably leading the way as far as losses versus the dollar are concerned,” said Sacha Tihanyi, a senior currency strategist at Scotiabank in Hong Kong. “Equities are doing a bit better. We haven’t seen a turn in the trade balance, which is a little bit concerning,” he said about Japan’s data.

The yen lost 0.4 percent to 98.07 per dollar as of 7:10 a.m. in London. Japan’s currency weakened 0.3 percent to 134.15 per euro. The shared currency traded at $1.3679 from $1.3687 on Oct. 18, when it touched $1.3704, the highest since Feb. 1.

The Bloomberg U.S. Dollar Index, which monitors the greenback against 10 other major currencies, was little changed at 1,003.16. It slumped 1 percent last week, the most since the five days ended Sept. 20, and reached 1,002.65 on Oct. 17, the lowest close since Feb. 19.

The MSCI Asia Pacific Index of stocks added 0.2 percent, following a 0.7 percent advance in MSCI’s World gauge at the end of last week.

Trade Deficit

Japan’s exports increased 11.5 percent in September from a year earlier, the weakest pace in three months, a finance ministry report showed in Tokyo. That compared with a 14.6 percent gain in August and the 15.6 percent median forecast of 24 economists surveyed by Bloomberg News. Imports exceeded exports by 932.1 billion yen ($9.5 billion), more than the 918.6 billion trade gap expected by economists.

The BOJ will continue easing until inflation is stable at its 2 percent target, Kuroda said today at a central bank branch managers’ meeting in Tokyo. Kuroda said in parliament today he is still aiming to achieve the goal in two years.

Japan’s Prime Minister Shinzo Abe is seeking to maintain momentum in a recovery spurred by fiscal and monetary stimulus by implementing growth measures that are the focus of an extraordinary session of parliament that began last week.

Fed Bets

The Fed buys $85 billion of bonds a month to put pressure on long-term borrowing rates and spur growth. Policy makers unexpectedly refrained from reducing purchases last month, saying they wanted more evidence of an economic recovery.

The central bank will delay the first cut to its buying until March, according to the median estimate of 40 economists in a Bloomberg survey conducted Oct. 17-18. A poll last month forecast the first reduction would be in December.

Fed policy makers had pledged since December they won’t consider raising the interest rate as long as the unemployment rate exceeds 6.5 percent. The jobless rate held at 7.3 percent last month, economists in a Bloomberg poll projected before the Labor Department data on Oct. 22. The release was postponed from Oct. 4 because of the partial government shutdown.

Economists in a separate Bloomberg survey estimate nonfarm payrolls increased by 180,000 workers last month.

“It’s hard to construct a bullish U.S. dollar scenario,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney. “The outlook is certainly for the Fed to be very generous in its monetary settings for probably longer than the market is thinking.”

Worst Performer

The dollar has fallen 3.5 percent in the past three months, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has risen 0.9 percent in the same period while the yen lost 0.6 percent.

“The yen is being sold in risk-on trade as stocks rise,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “Given that the bets for December tapering have been pared back, there is optimism that the Fed’s easy money will continue to support stock markets.”

In Europe, an index of consumer sentiment probably rose to minus 14.5 this month, the least negative reading since July 2011, economists said before the European Commission data on Oct. 23.

The euro’s 14-day relative strength index against the U.S. dollar rose to 68.5 on Oct. 18, near the 70 level which indicates an asset’s price has risen too rapidly and is poised to reverse course.

“The dollar is looking very oversold against the euro,” Michael Sneyd, a currency strategist at BNP Paribas SA, said on Bloomberg Television today. “What’s key with the U.S. data is that while it’s not strong enough to be causing the Fed to start tapering, it does look very strong, particularly relative to the data we’re having out of the euro zone.”

BNP expects the dollar at $1.28 per euro at year end.

Australia’s dollar bought 96.73 U.S. cents. It jumped 2.7 percent in the eight sessions through Oct. 18 when it reached 96.78, the strongest since June 4. 


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