By Mariko Ishikawa and Kristine Aquino -
Nov 19, 2012 12:39 PM GMT+0800
The yen touched the lowest level in
almost seven months as the Bank of Japan holds a two-day meeting
amid speculation the opposition party that advocates more
aggressive easing will take power in December’s election.
Japan’s currency dropped against most major counterparts after Liberal Democratic Party leader Shinzo Abe was reported to have said he’ll choose someone in favor of inflation targets as the next BOJ governor. Demand for the euro was limited before European finance ministers gather in Brussels tomorrow. Australia’s dollar climbed as gains in Asian shares boosted demand for higher-yielding assets.
“What’s going on in Japanese politics is probably a more important driver for the yen, at least in the near term, and that can see it weakening,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “In the medium term, you can get these knee-jerk reactions” to BOJ easing signals, he said.
The yen traded at 81.18 per dollar as of 1:36 p.m. in Tokyo from 81.32 on Nov. 16. The currency earlier touched 81.59, the weakest since April 25. It fetched 103.58 per euro from 103.60, after earlier dropping to as low as 104.11, the least since Oct. 25. The 17-nation euro climbed 0.1 percent to $1.2760.
Prime Minister Yoshihiko Noda last week dissolved the lower house of the Japanese parliament, paving the way for elections that polls show his Democratic Party of Japan will lose. Abe indicated he would consider asking the BOJ to directly buy the nation’s construction bonds if he becomes the next prime minister, Kyodo News cited him as saying on Nov. 17.
In a Bloomberg News poll of economists, all 21 economists surveyed expect BOJ Governor Masaaki Shirakawa’s board to take no action at the policy meeting that ends tomorrow. At its last gathering on Oct. 30, the central bank increased asset purchases by 11 trillion yen ($135 billion), announced a new lending program and signed a joint statement with the government on ending deflation. Shirakawa is due to step down in April.
Japan’s currency has fallen 6.8 percent this year, the most among the 10 developed currencies measured by Bloomberg Correlation-Weighted Indexes. The euro is the second-worst performer, losing 2.8 percent, while the dollar has declined 1.1 percent.
“We’d be looking for any further gains in dollar-yen to fade,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “Given the size of last week’s moves, I think we’ll probably just see some consolidation heading into the BOJ meeting.”
Futures traders decreased their bets the yen will fall against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- so-called net shorts -- was 30,447 on Nov. 13, compared with 40,104 a week earlier.
Bets the euro will drop against the dollar were 83,646, up from net shorts of 67,141 a week earlier.
“It’s quite likely that we get some positive noise out of the finance ministers’ meeting about Greece getting a sign-off on its next tranche,” said Bank of New Zealand’s Jones. “But the fundamental backdrop for the euro still isn’t favorable, given that incoming data has been quite weak.”
In Germany, manufacturing output may have contacted for a ninth-straight month. A purchasing managers’ index of manufacturing was probably at 46 in November, below the 50 line that divides expansion from contraction, according to the median estimate of economists surveyed by Bloomberg before the figures due on Nov. 22.
Data from last week showed the euro-area’s economy was pushed into a technical recession, with its gross domestic product shrinking for a second-straight quarter in the period that ended in September.
Asian shares opened higher today, helping the Australian dollar gain against most of its major peers. The so-called Aussie added 0.3 percent to $1.0374. The MSCI Asia Pacific Index (MXAP) of equities advanced 1.1 percent.
To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
Japan’s currency dropped against most major counterparts after Liberal Democratic Party leader Shinzo Abe was reported to have said he’ll choose someone in favor of inflation targets as the next BOJ governor. Demand for the euro was limited before European finance ministers gather in Brussels tomorrow. Australia’s dollar climbed as gains in Asian shares boosted demand for higher-yielding assets.
“What’s going on in Japanese politics is probably a more important driver for the yen, at least in the near term, and that can see it weakening,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “In the medium term, you can get these knee-jerk reactions” to BOJ easing signals, he said.
The yen traded at 81.18 per dollar as of 1:36 p.m. in Tokyo from 81.32 on Nov. 16. The currency earlier touched 81.59, the weakest since April 25. It fetched 103.58 per euro from 103.60, after earlier dropping to as low as 104.11, the least since Oct. 25. The 17-nation euro climbed 0.1 percent to $1.2760.
Prime Minister Yoshihiko Noda last week dissolved the lower house of the Japanese parliament, paving the way for elections that polls show his Democratic Party of Japan will lose. Abe indicated he would consider asking the BOJ to directly buy the nation’s construction bonds if he becomes the next prime minister, Kyodo News cited him as saying on Nov. 17.
LDP Favored
The Nikkei newspaper reported today that 25 percent of respondents in an opinion poll favor Abe’s LDP in the Dec. 16 election, compared with 16 percent for the ruling DPJ. The Nikkei cited a nationwide survey taken Nov. 16-18.In a Bloomberg News poll of economists, all 21 economists surveyed expect BOJ Governor Masaaki Shirakawa’s board to take no action at the policy meeting that ends tomorrow. At its last gathering on Oct. 30, the central bank increased asset purchases by 11 trillion yen ($135 billion), announced a new lending program and signed a joint statement with the government on ending deflation. Shirakawa is due to step down in April.
Japan’s currency has fallen 6.8 percent this year, the most among the 10 developed currencies measured by Bloomberg Correlation-Weighted Indexes. The euro is the second-worst performer, losing 2.8 percent, while the dollar has declined 1.1 percent.
Excessive Gain
The 14-day relative strength index for the dollar-yen rate rose to 70.4 on Nov. 16, above the 70 level that some traders see as a sign that an asset’s price has gained too fast and may reverse course.“We’d be looking for any further gains in dollar-yen to fade,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “Given the size of last week’s moves, I think we’ll probably just see some consolidation heading into the BOJ meeting.”
Futures traders decreased their bets the yen will fall against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- so-called net shorts -- was 30,447 on Nov. 13, compared with 40,104 a week earlier.
Bets the euro will drop against the dollar were 83,646, up from net shorts of 67,141 a week earlier.
Brussels Meeting
In Europe, finance ministers are aiming to stitch together Greece’s next aid payment this week. In addition to a disagreement between the European Union and International Monetary Fund over softening Greece’s debt target, the ministers will attempt to re-engineer the current bailout without asking taxpayers to put up more money.“It’s quite likely that we get some positive noise out of the finance ministers’ meeting about Greece getting a sign-off on its next tranche,” said Bank of New Zealand’s Jones. “But the fundamental backdrop for the euro still isn’t favorable, given that incoming data has been quite weak.”
In Germany, manufacturing output may have contacted for a ninth-straight month. A purchasing managers’ index of manufacturing was probably at 46 in November, below the 50 line that divides expansion from contraction, according to the median estimate of economists surveyed by Bloomberg before the figures due on Nov. 22.
Data from last week showed the euro-area’s economy was pushed into a technical recession, with its gross domestic product shrinking for a second-straight quarter in the period that ended in September.
Asian shares opened higher today, helping the Australian dollar gain against most of its major peers. The so-called Aussie added 0.3 percent to $1.0374. The MSCI Asia Pacific Index (MXAP) of equities advanced 1.1 percent.
To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
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