Yen Falls Against Most Peers Before Bank of Japan Concludes Policy Meeting

By Monami Yui - Mar 13, 2012 11:56 AM GMT+0800 


The yen fell versus most of its major peers before the Bank of Japan (8301) ends a two-day meeting to discuss interest rates and the size of an asset-purchase fund.
The dollar traded 0.5 percent from a 10-month high against the yen as evidence of a U.S. economic recovery tempered speculation that the Federal Reserve will signal additional easing at a meeting today. The euro advanced versus the U.S. currency after euro-area finance ministers approved a second Greek bailout, clearing the way for the first payment from the 130 billion-euro package ($171 billion) to be made this month. The Australian dollar gained as Asian stocks rallied.

“We need to watch whether they will signal any further asset purchases,” which would weaken the yen, said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender, referring to the Bank of Japan’s policy meeting. The BOJ “needs to ease further.”
The yen traded at 82.25 per dollar at 12:46 p.m. in Tokyo from 82.23 yesterday, after touching 82.65 on March 9, the weakest since April 27. Japan’s currency dropped 0.2 percent to 108.43 per euro. The euro gained 0.2 percent to $1.3183.

Twelve of 14 economists surveyed by Bloomberg News expect the BOJ to leave its asset-purchase program unchanged and keep the benchmark interest rate at a range of zero to 0.1 percent. The bank unexpectedly boosted bond buying by 10 trillion yen ($121 billion) Feb. 14. The yen has weakened 5.7 percent against the dollar since the day before the decision.
The BOJ may expand monetary stimulus today to show a commitment to ending deflation, according to Hiromichi Shirakawa, chief Japan economist at Credit Suisse AG and the only analyst who predicted last month’s easing.

U.S. Recovery Signs

The yen has declined 8.5 percent in the past three months, the worst performer among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 3 percent, and the euro slid 1.8 percent.
Retail sales in the U.S. increased 1.1 percent in February, the most in five months, according to the median estimate of economists in a Bloomberg survey before Commerce Department figures due today. That would follow data on March 9 that showed nonfarm payrolls increased by 227,000 in February after rising by a revised 284,000 the prior month. The unemployment rate held at a three-year low of 8.3 percent.

“Recent U.S. data may be strong enough to persuade policy makers to be less cautious about the pace of the recovery,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which provides currency margin-trading services. “The market is reducing bets for another round of quantitative easing, pushing the dollar higher.”

Greek Bailout

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, reached 80.132 yesterday, the most since Jan. 25 and was 0.2 percent lower at 79.716 today.

The index fell 0.4 percent on Jan. 25, when the Fed said subdued inflation and slack in the economy are likely to warrant keeping rates “exceptionally low” at least through late 2014.
The euro rallied from a three-week low versus the dollar touched yesterday after the currency bloc’s finance ministers approved Greece’s second bailout.

Greece is now in line to receive more than 100 billion euros in the next three years from the European Financial Stability Facility, the euro region’s temporary rescue fund, starting with payments of 5.9 billion euros in March, 3.3 billion euros in April and 5.3 billion euros in May, EFSF Chief Executive Officer Klaus Regling said.

‘Worst Is Over’

“The worst is over for the euro with Greece avoiding a disorderly default,” said Noriaki Murao, managing director in New York at the Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “I expect to see traders unwinding their short positions.”
The Australian and New Zealand dollars rose for the first time in three days as Asian shares reversed losses from yesterday, boosting demand for riskier assets.

The MSCI Asia Pacific Index (MXAP) of shares climbed 1.1 percent, rebounding from a 0.6 percent fall yesterday. Standard & Poor’s 500 Index futures rose 0.4 percent from yesterday, when the stocks gauge fell as much as 0.3 percent.
Australia’s dollar gained 0.4 percent to $1.0553 and New Zealand’s currency advanced 0.6 percent to 82.29 U.S. cents.

To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net