March 16 (Bloomberg) -- The yen rose on speculation Japanese exporters took advantage of its decline to a five-week low against the euro to purchase the currency.
The dollar gained for a second day against Malaysia’s ringgit on expectations more Federal Reserve policy makers will dissent with the “extended period” commitment to near-zero interest rates. Australia’s currency fell a third day versus New Zealand’s after the larger nation’s central bank dimmed expectations for rapid rate increases. The Bank of Japan started a two-day meeting where it may expand efforts to fight deflation.
“There’s talk that exporters are buying the yen against the euro and the dollar,” said Takashi Kudo, general manager of market information in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “This may be related to fiscal year-end repatriation, which could lead to more yen gains this month.”
Japan’s currency rose to 123.30 per euro as of 6:55 a.m. in London from 123.83 in New York yesterday, when it reached 125.32 yen, the weakest since Feb. 4. It climbed to 90.10 per dollar from 90.53. The euro bought $1.3684 from $1.3677.
The dollar rose 0.1 percent against Malaysia’s ringgit to 3.3225. Australia’s currency fell 0.4 percent to NZ$1.2993, and declined 0.4 percent to 82.48 yen.
The Federal Reserve will announce its interest-rate decision today, with all 90 economists surveyed by Bloomberg News forecasting policy makers will keep the benchmark interest rate at a record-low range of zero to 0.25 percent. Since March 2009, the Fed has said “exceptionally low” rates are likely warranted for “an extended period.”
FOMC Reservations
Kansas City Fed President Thomas Hoenig voted against repeating the statement on Jan. 27 because he wanted to keep “the broadest options possible.” Since then, Dallas Fed President Richard Fisher, James Bullard of St. Louis and the Philadelphia Fed’s Charles Plosser have also expressed reservations.
The Fed’s “‘extended period’ language will be more vigorously debated, which could be dollar supportive and be seen as a step closer to them actually changing the language,” said Michael Katz, a currency strategist at Forecast Ltd. in Sydney. “Once they actually change the language we can probably start expecting rate hikes in about four to six months.”
Gains in the dollar were tempered on speculation some investors trimmed long positions before the Fed’s decision. A long position is a bet an asset will strengthen.
‘Position Adjustment’
“There appears to be some position adjustment” in the U.S. and Japanese currencies, said Shinichi Hayashi, a dealer in Tokyo at Shinkin Central Bank, the central institution for Japan’s financial cooperatives.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 74,551 on March 9, compared with net shorts of 66,770 a week earlier, figures from the Washington-based Commodity Futures Trading Commission showed on March 12.
The Bank of Japan will expand a 10 trillion yen ($111 billion) credit program for lenders at a two-day meeting starting today, according to a Bloomberg survey.
“Fiscal policy focusing on stimulating demand will have some impact against deflation,” Finance Minister Kan said in parliament today. “The central bank can make an inflationary impact with monetary policy.”
The Australian dollar fell toward a one-week low against New Zealand’s currency after minutes from the Reserve Bank of Australia’s last meeting signaled the pace of rate increases may be gradual. Odds the RBA will raise its benchmark rate to 4.25 percent in April dropped to 33 percent from 42 percent yesterday, according to a Credit Suisse index based on swaps.
German Investor Confidence
The euro traded near a 16-month low against the Swiss franc before a German report that may show investor confidence fell for a sixth month, adding to signs Europe’s largest economy is struggling to recover. It fetched 1.4516 franc from 1.4524 yesterday, when it touched 1.4508, the least since Oct. 28, 2008.
Germany’s ZEW Center for European Economic Research will today say its index of investor and analyst expectations fell to 43.5 in March from 45.1 in February, according to a Bloomberg News survey. ZEW releases the report, which aims to predict developments six months ahead, at 11 a.m. in Mannheim.
“Europe’s economic growth is slowing and the sovereign debt issues are not resolved yet,” said Richard Grace, chief currency strategist at Commonwealth Bank in Sydney. “That’s going to continue to be negative for euro.”
All 27 European Union finance ministers meet today in Brussels after euro-area finance ministers yesterday debated assistance plans for Greece.
Greece Plan
Aid to Greece would probably come through governments pooling funds to extend direct loans to Greece, said a European official who asked not to be named. The meeting yesterday didn’t resolve the size of future loans, which countries would offer them or the rates and durations.
“Definitely, there are worries that concrete aid measures for Greece may not be announced,” said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust & Banking Co. in Tokyo. “It’s a negative for the euro.”
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
Last Updated: March 16, 2010 03:03 EDT
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