Yen Remains Lower on Speculation Kuroda Will Signal More Easing

By Candice Zachariahs & Kevin Buckland

The yen remained lower against most major peers on speculation Bank of Japan (8301)Governor Haruhiko Kuroda will announce a shift in monetary policy today.

Japan’s currency traded 0.8 percent from a 3 1/2-year low to the dollar after Kuroda told reporters he would talk about monetary policy at a news conference at 6 p.m. in Tokyo, his first since becoming head of the central bank yesterday. New Zealand’s dollar advanced against its 16 major counterparts following reports that showed its economy expanded faster than predicted, and manufacturing growth outpaced estimates in China, its biggest trading partner. “Market expectations for policy easing from the new Bank of Japan continue, keeping pressure on the yen to weaken,” said Takahiro Nakano, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. “The yen will move toward 100 to the dollar, but it’ll need something additional to get past that.”

The yen traded at 95.96 per dollar as of 12:55 p.m. in Tokyo from 96.01 yesterday and after reaching 96.71 on March 12, the weakest since August 2009. It declined 0.1 percent to 124.26 per euro from yesterday, when it dropped 1.3 percent. The euro rose 0.1 percent to $1.2948.

The Japanese currency has fallen 19 percent against the dollar over the past six months on expectations new BOJ leadership would carry out additional easing. Kuroda has pledged to do whatever is needed to end deflation and has expressed confidence a 2 percent inflation target is achievable.

Kuroda Easing

“Kuroda is very aware of how high the market’s expectations are, so I doubt he’ll waver now,” said Noriaki Murao, a New York-based managing director of the marketing group at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest listed financial group. “We’re in an environment where it’s very easy for the yen to weaken against the dollar.”

Losses in the yen were limited after a government report showed Japan’s trade deficit narrowed more than forecast. The shortfall eased to 777.5 billion yen ($8 billion) from 1.6 trillion yen in January, the Ministry of Finance said in a report today. The median forecast was for a 855.9 billion yen gap, according to a Bloomberg News survey.

“The yen got a bit of a bounce from the trade deficit being narrower than expected, but I expect Japan to stay in deficit for a while,” said Mizuho Trust’s Nakano. “That’s another reason for the yen to weaken.”

The BOJ’s real effective yen rate fell to 83.1 per dollar in February, the lowest level since August 2008, according to data from the central bank. The rate is calculated based on the value of Japan’s trade with other countries, adjusted for the price indexes of the nation and its partners, according to the central bank.

N.Z. GDP

New Zealand’s dollar climbed after the statistics bureau said gross domestic product rose 1.5 percent in the three months ended Dec. 31 from the previous quarter, when it expanded 0.2 percent. Growth exceeded all of the estimates in a Bloomberg survey of 10 economists and was almost twice the central bank’s 0.8 percent forecast.

“It looks like buoyant economic activity in New Zealand will be sustained,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “That’s swayed some doubts about the New Zealand economy and seen the New Zealand dollar enjoy a pretty strong bounce.”

The currency was also supported by a private report that showed Chinese manufacturing growth accelerated more than predicted. The HSBC Flash China Manufacturing Purchasing Managers Index rose to 51.7 in March from 50.4 the month before. The median estimate by economists in a separate Bloomberg survey was for a reading of 50.8. A number above 50 indicates expansion.

The so-called kiwi advanced 0.6 percent to 82.71 U.S. cents and gained 0.5 percent to 79.37 yen.

To contact the reporters on this story: Candice Zachariahs in Sydney atczachariahs2@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net

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