Bloomberg News

Yen Drops as Stocks Advance; Dollar Trades Near 14-Month

January 30, 2013

The yen declined versus most of its major counterparts as Asian stocks rose for a second day, spurring investors to buy higher-yielding assets amid expectations Japan will expand monetary stimulus.

The dollar approached its weakest in more than a year versus the euro before data forecast to show U.S. growth and job gains slowed. The Federal Open Market Committee will issue its policy statement today. New Zealand’s currency fell before the Reserve Bank sets interest rates tomorrow.

“There is a general upbeat tone to markets,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “The Bank of Japan is going to maintain a more dovish policy setting for longer. That’s what’s underpinning this yen weakness.”

The yen slid 0.2 percent to 90.90 per dollar as of 6:53 a.m. in London. It lost 0.2 percent to 122.68 per euro. The dollar traded at $1.3491, little changed from yesterday, when it touched $1.3497, the lowest level since Dec. 2, 2011.

The MSCI Asia Pacific Index (MXAP) of stocks rose 0.7 percent, adding to a gain of 0.9 percent yesterday.

Japan’s currency is poised for a 4.6 percent drop against the dollar in January. That would be a fourth month of declines, the longest losing streak since August 2008.

The BOJ this month doubled its inflation target to 2 percent and agreed to open-ended asset purchases beginning 2014 as Prime Minister Shinzo Abe urged broader monetary easing in a bid to boost growth and end more than a decade of price declines.

‘Early Stages’

“From an economic perspective, the yen can still go much weaker,” Ramin Toloui, global co-head of emerging markets portfolio management in Singapore at Pacific Investment Management Co., which oversees the world’s largest bond fund, said in an Bloomberg Television interview. “We’re probably still in the early stages of weakening in the yen.”

The yen declined 6.3 percent in the past month, the biggest slide among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar lost 0.2 percent and the euro climbed 2.1 percent.

The U.S. Commerce Department will probably say today the nation’s gross domestic product advanced at a 1.1 percent rate in the three months through December, according to the median estimate of economists surveyed by Bloomberg News. That would be the weakest since the first quarter of 2011.

Companies added 165,000 jobs in January, down from 215,000 the previous month, the Roseland, New Jersey-based ADP Research Institute is forecast to say today according to a separate Bloomberg poll.

‘Evenly Divided’

Federal Reserve officials will decide on policy today after minutes of their December meeting released this month showed participants were “approximately evenly divided” between those who said it would be appropriate to end its third round of asset purchases, known as quantitative easing, around mid-2013 and those who thought the buying would need to continue beyond that.

“The U.S. economy continues to be weak,” said Peter Dragicevich, a Sydney-based currency economist at Commonwealth Bank of Australia (CBA), the nation’s largest lender. “That will just reinforce the perception in the market that the Fed’s asset purchases will continue for a while yet, and that will weaken the dollar.”

The Fed is buying $85 billion of Treasuries and mortgage debt each month to boost economic growth and spur employment.

New Zealand’s currency, known as the kiwi, slid versus all of its 16 major counterparts before central bank Governor Graeme Wheeler releases a policy decision tomorrow. All 16 economists surveyed by Bloomberg News expect him to leave borrowing costs at a record-low 2.5 percent.

The kiwi fell 0.4 percent to 83.62 U.S. cents.

To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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