Yen Drops on BOJ Stimulus Signs, Asian Stock Gains

By Kristine Aquino and Sharon Chen - Aug 14, 2012 12:05 PM GMT+0800

The yen weakened versus all 16 major counterparts as Asian shares rallied and minutes of the Bank of Japan (8301)’s July meeting signaled policy members are considering ways to expand stimulus.

Japan’s currency slid for a second day against the euro as equities gains curbed demand for haven assets. Demand for Europe’s shared currency was damped before data forecast to show the euro-area economy contracted in the second quarter as French gross domestic product shrank and Germany’s expansion slowed. New Zealand’s dollar was supported after a report showed retail sales increased by more than economists forecast.

“There’s going to be no change to the BOJ’s stance so long as they’re short of their inflation goal,” Sacha Tihanyi, a Hong Kong-based senior currency strategist at Scotiabank, a unit of Bank of Nova Scotia (BNS), said in reference to the central bank’s 1 percent price target. Sentiment today “is looking a little bit better, so I think that’s pretty much consistent with a little bit of softening in the yen.”

The yen lost 0.1 percent to 78.42 per dollar as of 12:42 p.m. in Tokyo. It fell 0.2 percent to 96.79 per euro. The 17- nation currency was at $1.2343 after rising 0.4 percent to $1.2332 yesterday, the biggest one-day advance since Aug. 3.
The MSCI Asia Pacific Index (MXAP) of shares climbed 0.1 percent.

BOJ Options

The BOJ avoided adding stimulus at its July meeting, expanding its asset-purchase program to 45 trillion yen ($574 billion) from 40 trillion, while cutting its loan facility to 25 trillion yen from 30 trillion yen.

A few board members said the BOJ shouldn’t rule out any options in advance, while one said price gains without economic improvement are not good, minutes of the gathering showed today. The BOJ established its inflation goal in February.

Figures released yesterday showed Japan’s economy grew at an annualized 1.4 percent in the three months through June 30, missing economist estimates for a 2.3 percent pace.

The yen has declined 2.4 percent in 2012, the third-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro dropped 5.5 percent in the same period, the biggest slide among the gauge’s members. The dollar fell 0.2 percent.

Data due today that may add to signs Europe’s debt crisis is weighing on the broader economy. The region’s fiscal woes have prompted five of the trading bloc’s 17 states to seek international bailouts.

“Today we’re going to be worried about euro-zone data.” said Robert Rennie, chief currency strategist at Westpac Banking Corp. (WBC) in Sydney. “The euro will continue to struggle to mount a sustainable rally.”

France, Germany

The euro area economy probably shrank 0.2 percent in the second quarter from the previous period, economists surveyed by Bloomberg News predicted before gross domestic product data is released today. France’s GDP probably contracted by 0.1 percent from the first quarter, while German growth slowed to 0.2 percent, separate surveys showed.

The euro’s recent declines below its 21-day moving average may signal a drop to 94.12 yen, Citigroup Inc.’s Tokyo-based currency strategist Osamu Takashima wrote in a report published today. The level was last seen on July 24 and was the least since November 2000, according to data compiled by Bloomberg. “The downside risk for the pair must obviously be larger than the upside,” Takashima wrote.

The New Zealand dollar strengthened after the statistics bureau said today sales adjusted for inflation gained 1.3 percent in the three months through June. That compares with a 0.6 percent decline in the first quarter and a 0.7 percent estimated increase.

“This is definitely a positive number,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., referring to retail sales. “That tells you the consumer sector is in decent health, and the kiwi got a little bit of a boost.”

The so-called kiwi bought 80.95 U.S. cents from 80.92. It added 0.2 percent to 63.47 yen.
To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Sharon Chen in Singapore at schen462@bloomberg.net
 
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net