The yen strengthened against all except one of its 16 major counterparts after minutes from the Bank of Japan’s latest meeting showed one policy maker advocated restricting stimulus to a two-year period.
The Dollar Index rose for the first time in five days as a report showed wholesale prices increased more than forecast last month. Japan’s currency advanced for a fourth day versus the dollar amid waning bets the Federal Reserve is about to slow its bond-buying stimulus that tends to debase the greenback. The Turkish lira gained for a fourth day against the dollar after the prime minister met with protesters to try to end more than two weeks of unrest.
“The rebound in the yen has been going for a few weeks now and all the positions have been shaken out,” said Greg Anderson, head of global foreign-exchange strategy at Bank of Montreal, by phone from New York. “The economic data out this morning was a little bit dollar-positive. We’ll probably get a bit of a dollar uplift into the weekend.”
The yen strengthened 0.3 percent to 95.11 per dollar at 8:55 a.m. in New York, extending its advance this week to 2.5 percent. Japan’s currency appreciated 0.7 percent to 126.61 per euro after rising 0.4 percent. The dollar gained 0.5 percent to $1.3311 per euro.
The BOJ should specify a two-year limit for its unprecedented monetary easing to help quell bond-market volatility, according to one of the central bank’s board members cited in the minutes of the May 21-22 meeting.
The central bank could state that easing “should be restricted to about two years” and then be reviewed “in a flexible manner,” the board member said, according to the record of the meeting.
“For a Bank of Japan board member to advocate restricting the quantitative-easing program to just two years is a concern to the market,” said Alvin Tan, a director of foreign-exchange strategy at Societe Generale SA in London. “Yen strength can continue while we don’t get clarity out of Japan on this. We believe that the Fed’s exit will be tentative and drawn out.”
The yen has slumped 7.3 percent this year, the worst performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes, as the Bank of Japan embarked upon unprecedented stimulus to spur growth. The euro gained 3.7 percent and the dollar added 2.7 percent.
One-month implied volatility of the dollar-yen currency pair reached 18.9 percent, the most since March 2011, and was at 16.5 percent. The JPMorgan Global FX Volatility Index rose to 11.43 percent, the most since June 2012. The gauge has climbed from 7.05 percent in December, which was the lowest since July 2007, and was at 10.6 percent.
The Dollar Index pared a fourth weekly decline as producer- price index rose 0.5 percent after falling 0.7 percent in April, which was the biggest drop in more than three years, according to a Labor Department report released in Washington. The median estimate in a Bloomberg survey of 76 economists projected the index would gain 0.1 percent.
Fed policy makers next meet on June 18-19 after Chairman Ben Bernanke said on May 22 the central bank could reduce its monthly purchases of $45 billion of Treasurys and $40 billion of mortgage-backed securities if the employment outlook shows sustainable improvement.
The Wall Street Journal reported that the Fed may push back on expectations of a rate increase.
The Dollar Index, which Intercontinental Exchange Inc. uses to monitor the greenback against the currencies of six U.S. trade partners gained 0.2 percent to 80.933 after falling to 80.50, the lowest since Feb. 20.
Turkey’s lira strengthened after Prime Minister Recep Tayyip Erdogan said the Istanbul municipality may set up ballot boxes for voting on the future of Gezi Park. Plans to redevelop the park had sparked off protests in the capital and other major cities since May 28.
The premier met for four hours with a group including two representatives of Taksim Solidarity, which has spoken on behalf of protesters who have filled Istanbul’s Taksim Square for the past two weeks, the official Anatolia News Agency said.
The lira gained 0.4 percent to 1.8543 per dollar after sliding to 1.9092 on June 11, the weakest since December 2011.
The Australian and New Zealand dollars declined amid uncertainty over the Fed’s strategy for exiting stimulus before next week’s policy meeting.
“We’re going to see just as much volatility next week, particularly leading up to the Fed meeting,” said David Forrester, a senior vice president for Group of 10 foreign- exchange strategy at Macquarie Bank Ltd. in Singapore. “The Aussie has been considered a big beneficiary of QE.”
Australia’s dollar fell 0.3 percent to 96.10 U.S. cents after surging 1.6 percent. The New Zealand currency dropped 0.2 percent to 80.81 U.S. cents.
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