Tags: Yen Slides to Three-Year Low Versus Euro After BOJ Franc Falls

Yen Slides to Three-Year Low Versus Euro

Wednesday, 22 May 2013 07:43 AM

The yen fell to the weakest in three years against the euro after Bank of Japan policy makers affirmed a plan to double the monetary base over two years and their statement showed no concern with rising bond yields.

Japan’s currency declined versus 13 of its 16 major peers after a government report showed the trade deficit swelled more in April than analysts forecast. The dollar dropped for a third day against the euro before Federal Reserve Chairman Ben S. Bernanke addresses Congress on the outlook for the U.S. economy. The franc fell to the weakest since May 2011 versus the euro after Swiss National Bank President Thomas Jordan said an adjustment of the currency’s cap was possible.

“The yen appears to have got its first push lower from disappointing trade data that showed the weaker yen trend still has some way to go before Japan can correct its widening trade deficit,” said Eimear Daly, a currency analyst at Monex Europe Ltd. in London. “A failure of the BOJ minutes to mention rising yield levels allowed the yen to move further.”

The yen slumped 0.6 percent to 133.11 per euro at 7:14 a.m. in New York after depreciating to 133.28, the weakest since January 2010. Japan’s currency dropped 0.5 percent to 102.96 per dollar after declining to 103.31 on May 17, the least since October 2008. The dollar fell 0.2 percent to $1.2929 per euro.

Flexible Manner

BOJ Governor Haruhiko Kuroda told reporters in Tokyo that the central bank will conduct its debt purchases in a flexible manner, and that the recent volatility in government securities isn’t yet affecting the economy. The central bank will expand the supply of money in the economy by 60 to 70 trillion yen a year, as pledged in April, the BOJ said.

Japanese exports rose 3.8 percent from a year earlier, the Finance Ministry said, less than the median 5.4 percent estimate of economists surveyed by Bloomberg News. The trade deficit expanded to 879.9 billion yen, the widest in three months.

The yen has tumbled 13 percent this year, the worst performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro advanced 2.7 percent and the dollar climbed 5 percent.

The dollar fell against the euro before Bernanke testifies to the Joint Economic Committee in Washington. The Fed is buying $85 billion a month in Treasury and mortgage debt to push down borrowing costs and spur growth.

‘Isn’t Hawkish’

“Bernanke isn’t hawkish, so I think he’s more likely to continue monetary easing,” said Takuya Kawabata, an analyst at Gaitame.com Research Institute Ltd. in Tokyo. “The market will probably respond with dollar-selling to Bernanke’s remarks.”

Fed Bank of New York President William C. Dudley said in an interview with Michael McKee airing today on Bloomberg Television that policy makers will know in three to four months whether the economy is healthy enough for the central bank to begin reducing stimulus.

The Federal Open Market Committee will release the minutes of its April 30-May 1 policy meeting today.

The franc weakened to a one-year low against the euro after Swiss National Bank President Jordan said a shift of the cap on the currency and negative interest rates are among measures it may take to prevent a tightening of monetary conditions.

“The adjustment of the minimum exchange rate is something that principally belongs to the options if needed,” Jordan told reporters in Frankfurt yesterday. “We will maintain the minimum exchange rate for as long as necessary.”

The franc slid 0.6 percent to 1.2595 per euro after declining to 1.2614, the weakest level since May 20, 2011. The Swiss currency fell 0.4 percent to 97.43 centimes per dollar.

Pound Weakens

The pound declined to a four-week low against the euro after a government report showed U.K. retail sales unexpectedly dropped last month.

The U.K. currency slid to a six-week low versus the dollar after minutes of the Bank of England’s May 8-9 policy meeting showed Governor Mervyn King was defeated for a fourth month in his bid to expand stimulus. King, David Miles and Paul Fisher maintained their campaign to increase so-called quantitative easing by 25 billion pounds ($37.7 billion) from the current 375 billion pounds.

“The retail sales report today will add downward pressure to the pound,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. “I have a more optimistic view on the U.K. outlook than the market consensus but I can understand why the data today would boost speculation for further quantitative easing.”

The pound fell 0.6 percent to 85.67 pence per euro after depreciating to 85.78 pence, the weakest since April 22. The U.K. currency declined 0.4 percent to $1.5089 after falling to $1.5075, the lowest since April 4.

The Australian dollar approached an 11-month low against the U.S. currency after Westpac Banking Corp. and Melbourne Institute said their index of consumer confidence slumped by the most in 17 months.

The so-called Aussie dropped 0.5 percent to 97.55 U.S. cents after sliding to 97.11 cents on May 17, the weakest level since June 5.

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Yen Slides to Three-Year Low Versus Euro After BOJ; Franc Falls
Yen Slides to Three-Year Low Versus Euro After BOJ Franc Falls
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2013-43-22
Wednesday, 22 May 2013 07:43 AM
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