Yen Slides as BOJ Easing Spurs Bets on Further Drop

By Kristine Aquino

The yen fell versus most of its 16 major counterparts as the Bank of Japan (8301)’s unprecedented stimulus measures aimed at ending almost two decades of deflation spurred bets the currency will weaken further.

The yen was 1 percent from 100 per dollar before BOJ Governor Haruhiko Kuroda speaks at a Yomiuri newspaper event on April 12, following his decision last week to double monthly bond purchases to achieve 2 percent annual inflation in two years. The greenback traded near a three-week low versus the euro before the Federal Reserve releases minutes of its March meeting. Australia’s dollar gained after Chinese trade data showed a recovery in imports last month. “We should be ready for the yen to weaken to 100 per dollar,” said Kikuko Takeda, a senior analyst in London at the Bank of Tokyo-Mitsubishi UFJ Ltd. “Expectations had driven yen weakness at first, and now Kuroda’s decision that made these expectations come true reassures investors that they can sell the yen further.”

The yen was little changed at 99.09 per dollar as of 1:52 p.m. inTokyo from yesterday, when it touched 99.66, the weakest since May 2009. Japan’s currency fetched 129.70 per euro from 129.55 in New York. The dollar was little changed at $1.3089 versus its European counterpart. It slid to $1.3103 per euro yesterday, the least since March 15.

BOJ Action

BOJ policy makers said April 4 they will boost monthly debt purchases to 7.5 trillion yen ($76 billion). They also suspended a cap on some bond holdings and dropped a limit on debt maturities. Officials will next meet on April 26.

“Bold monetary easing will cause a change from deflation to inflation,” Japanese Prime Minister Shinzo Abe said in parliament today. “As a result, the yen weakens, or rather, the excessively strong yen is being corrected.” The government of the world’s third-biggest economy is not seeking to intentionally weaken its currency, Abe said.

UBS AG revised its dollar-yen forecast for the end of 2013 to 110 from 100 previously. The currency’s weakness is only halfway through amid “strong easing” initiated by the BOJ, analysts led by London-based economist Larry Hatheway wrote in an e-mailed note to clients today.

Upside Intact

The focus for the greenback is the key resistance from 99.70 yen to 101.45, an area that contains the 50 percent retracement of the currency’s drop from the 2007 “cycle high” and the 2009 peak,Niall O’Connor, a technical analyst at JPMorgan Chase & Co., wrote in a research note to clients yesterday. “The overall upside bias is intact” for the dollar versus the yen, O’Connor wrote.

The yen has fallen 12 percent this year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 1.1 percent and the dollar added 2 percent.

Minutes of the Fed’s March meeting are due for release today. Chairman Ben S. Bernanke left the pace of government and mortgage debt purchases at $85 billion a month and said further improvement in the U.S. labor market is needed for the central bank to consider reducing its record monetary easing.

The Commerce Department may say on April 12 that U.S. retail sales stagnated last month after a 1.1 percent gain in the previous period, according to the median estimate of economists surveyed by Bloomberg News.

Demand for the relative safety of the dollar increased after Democratic Senator Carl Levin ofMichigan, chairman of the Senate Armed Services Committee, said a missile test by North Korea “could be imminent.” He spoke yesterday on CNN.

The Dollar Index was little changed at 82.335 after falling 0.5 percent yesterday. It’s up 3.2 percent since the end of last year.

Australia’s currency climbed for a third day after a report today showed imports by China, the South Pacific nation’s biggest trading partner, climbed 14.1 percent in March from a year earlier. That’s more than twice the 6 percent gain predicted by economists in a Bloomberg poll and a reversal from the 15.2 percent decline recorded in February.

The so-called Aussie rose 0.2 percent to $1.0507.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

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