Yen Climbs on Safety Demand as Cyprus Banks Reopen; Euro Rises

By Emma Charlton & Kevin Buckland 

The yen rose versus a majority of its 16 most-traded counterparts as Cyprus’s banks reopened for the first time since striking a bailout deal that forced losses on some depositors, spurring demand for the safest assets.

Japan’s currency strengthened as the Bank of Japan (8301) reiterated its policy-easing options, damping speculation for additional novel measures to boost the economy. The euro rose against the dollar.

“The yen is stronger partly because of the safety principle,” said Steven Barrow, head of Group of 10 research at Standard Bank Plc in London. “The markets may be sensitive to the news around the reopening of banks in Cyprus. The market is well set up for something reasonably aggressive from the BOJ so the downside risks for the yen against the dollar are limited.”

The yen fell 0.1 percent to 120.86 per euro at 7:43 a.m. New York time, after reaching 119.75, the strongest level since Feb. 27. Japan’s currency gained 0.1 percent to 94.33 per dollar. The 17-nation euro rose 0.3 percent to $1.2815. It touched $1.2751 yesterday, the lowest level since Nov. 21.

The Central Bank of Cyprus’s capital controls will include a 300-euro daily limit on withdrawals and restrictions on transfers to accounts outside the country. Banks opened at midday. They will close at 6 p.m. local time, Yiangos Dimitriou, head of the central bank’s audit department, said yesterday in comments broadcast on state-run CyBC television.

Capital Movements

The European Commission said in a statement the control on capital movements must remain “proportionate” and be lifted as soon as possible.

“There is a risk of Cyprus being a blueprint for other countries so there is a lot of focus on the nation and the capital controls,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “We will slowly see transactions starting again, so the euro may stabilize.”

The Federal Labor Agency said the number of people out of work in Germany increased a seasonally adjusted 13,000 to 2.94 million. Economists had predicted a decline of 2,000, according to the median of 24 estimates in a Bloomberg News survey.

The euro has dropped 0.6 percent in the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar has risen 3 percent, while the yen dropped 7 percent, the worst performer.

BOJ Governor Haruhiko Kuroda told parliament’s upper house today that policy makers need to lower yields on longer-maturity government bonds and that purchases of risk assets may also be needed. The comments echoed lower-house testimony on March 26, when Kuroda pledged to buy more government bonds to reach the BOJ’s inflation goal. The central bank will discuss policy on April 3-4.

“Kuroda’s been talking up more aggressive easing and stamping out deflation,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “If the governor does what’s expected, we’ll probably see limited reaction. There’s probably more risk that the yen strengthens than weakens.”

To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net

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