Yen Rises First Time in 3 Days on Stimulus Concern
The yen strengthened for the first time in three days against the dollar as emerging-market currencies declined and strategists forecast the Bank of Japan will fall short of its 2 percent inflation goal.
The Japan’s currency rose versus all of its 16 major counterparts after slumping yesterday when the central bank extended its lending programs. The dollar declined to a seven-week low against the euro before the Federal Reserve releases minutes of its January policy meeting. Emerging-market currencies weakened as anti-government protests escalated in Ukraine and Thailand.
“As much as policy direction is still pointing toward dollar-yen upside, people are staying on a cautious note,” Geoffrey Yu, senior currency strategist at UBS AG in London, said in a phone interview. “The yen right now, we have been lower, so it’s not exactly a risk-off mode, it’s just that there’s not much interest right now in playing the other side of it.”
The yen advanced 0.3 percent to 102.06 per dollar as of 9:28 a.m. in New York after dropping 0.4 percent yesterday. Japan’s currency appreciated 0.3 percent to 140.41 per euro. The dollar was little changed at $1.3759 per euro after sliding to $1.3773, the weakest level since Jan. 2.
Emerging Markets
The baht fell for a second day as protesters fired guns and threw a grenade at police in Bangkok yesterday, injuring 33 officers. In Ukraine, clashes between police and anti-government activists killed at least 25 people and left hundreds injured in the bloodiest episode of the country’s three-month standoff.
The baht weakened 0.2 percent to 32.55 per dollar after slumping 0.6 percent yesterday. Ukraine’s hryvnia slid as much as 1.9 percent to 9.025 per dollar.
The People’s Bank of China plans to expand the yuan’s trading band this year in an “orderly” manner as it moves toward a more convertible currency.
The spot rate in Shanghai is currently allowed to fluctuate a maximum 1 percent on either side of a daily fixing set by the central bank. The trading band was last widened in April 2012 from 0.5 percent, and before that from 0.3 percent in May 2007. The currency weakened 0.2 percent 6.0764 versus the dollar.
Central Bank
The Bank of Japan yesterday doubled a funding tool to 7 trillion yen and said individual banks may borrow twice as much low-interest money as previously under a second facility. It left unchanged a pledge to expand the monetary base by 60 trillion to 70 trillion yen per year.
Japan’s currency will tumble 11 percent to 115 per dollar in 2015, according to a Bloomberg survey of analysts, short of the 120 level economists estimate will be needed for consumer prices to reach the BOJ’s goal.
“What we’ve seen in the whole of February is a really soggy dollar,” said Jane Foley, a senior currency strategist at Rabobank International in London. “In that environment it’s going to be difficult for dollar-yen to push higher,” she said, referring to the yen weakening against the dollar.
The yen has slumped 5.4 percent in the past six months, the worst performer after the Canadian dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The U.S. dollar weakened 0.7 percent, while the euro strengthened 2.7 percent.
Fed Policy
The Fed said in December it would start paring stimulus by cutting bond purchases by $10 billion each month, and policy makers decided on another reduction of the same size at its Jan. 28-29 meeting.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, was little changed at 1,017.50 after declining to 1,015.57 on Feb. 17, the least since Dec. 18.
The pound fell for a third day versus the dollar after the U.K. unemployment rate unexpectedly increased in the fourth quarter, suggesting the recent improvement in the labor market has lost some momentum.
The jobless rate measured by International Labour Organization methods climbed to 7.2 percent from 7.1 percent in the three months through November, the Office for National Statistics said in London. Economists surveyed by Bloomberg forecast no change.
The pound fell 0.1 percent to $1.6676 after climbing as much as 0.3 percent before the data was released.