Bloomberg News

Yen Strengthens as Lawmaker Says Party Will Oppose Iwata

March 12, 2013

Yen Drops to 3 1/2-Year Low Before BOJ Releases Meeting Minutes

“Dollar-yen has seen a big run up because of expectations for Bank of Japan easing,” said Imre Speizer, a strategist at Westpac Banking Corp. in Auckland. Photographer: Yuriko Nakao/Bloomberg

The yen rose for the first time in five days against the dollar as an opposition lawmaker said his party will oppose Bank of Japan (8301) Deputy Governor Nominee Kikuo Iwata, who investors see as endorsing monetary policy easing.

The pound reached the weakest level since June 2010 versus the dollar and the lowest to the Australian currency since 1985 after industrial output unexpectedly declined. Hungary’s currency weakened to a nine-month low against the euro and plunged the most among 31 major currencies as lawmakers passed constitutional changes some European Union members said undermine democracy. The 17-nation currency erased losses earlier against the greenback as oil and gold rallied.

“As far as the yen goes, we think a lot is already priced in,” Sireen Harajli, a foreign-exchange strategist in New York at Credit Agricole SA, said in a telephone interview. “Until you actually see new policies, we don’t see the dollar strengthening very aggressively against the yen.”

The yen rose 0.2 percent to 96.08 per dollar after sliding 3.1 percent during the previous four days. Japan’s currency added 0.4 percent to 125.23 per euro. The euro fell 0.1 percent to $1.3034 after sliding to $1.2955 on March 8, the lowest since Dec. 11.

Credit Agricole projected the yen weakening to 97 versus the dollar by the end of the year.

Hungary’s forint depreciated 1.6 percent to 306.57 per euro and 1.7 percent to 235.21 against the dollar.

Peso Strength

Mexico’s peso rallied as short-term bond yields fell to record lows amid speculation policy makers will keep benchmark borrowing costs unchanged after cutting them last week.

The currency strengthened 0.8 percent to 12.4451 per dollar.

The pound dropped for a fifth day against the dollar as the Office for National Statistics said industrial production fell 1.2 percent in January. The median forecast in a Bloomberg News survey of economists was for an increase of 0.1 percent.

The pound declined 0.1 percent to $1.4903 after sliding to $1.4832, the lowest level since June 23, 2010. Sterling weakened 0.5 percent to 1.4435 versus Australia’s dollar.

South Africa’s rand slid to the weakest in almost four years versus the dollar after the nation posted a larger-than forecast current-account deficit.

South Africa

The shortfall was 6.5 percent of gross domestic product in the fourth quarter, versus a revised 6.8 percent in the previous three months, the central bank said. Economists surveyed by Bloomberg predicted it would shrink to 6.3 percent.

The rand slid 0.9 percent to 9.1695 per dollar after weakening to 9.2122 per dollar, the lowest since April 2009.

The European Central Bank “should ease shortly,” said Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co. “Euro needs to decline to support peripheral countries,” he said in a Twitter post.

ECB policy makers last week kept their benchmark interest- rate unchanged at 0.75 percent while lowering forecasts for economic growth and price increases. “In the short term, we in the euro area have, if anything, declining inflation risks,” Bundesbank President Jens Weidmann said in a statement today when the Frankfurt-based central bank released its 2012 annual report.

Inflation View

“You just had Weidmann saying he expects inflation to come down,” Peter Gorra, chief dealer in New York at BNP Paribas SA, said in a telephone interview. “Coming from one of the biggest hawks out there, to me that’s a sign they can cut rates at some point. Again, another negative for the euro.”

The Japanese currency might fall to 97.60, its lowest level since August 2009, in the next three to six days after decreasing past support at 96.55 yesterday, according to Marshall Gittler, head of global foreign-exchange strategy at Limassol, Cyprus-based IronFX Financial Services Ltd.

Japan’s Iwata may be confirmed even without backing from the Democratic Party of Japan if Prime Minister Shinzo Abe can secure the support of smaller opposition parties. The central bank can end deflation solely through buying government debt and doesn’t need to purchase riskier assets to meet its inflation target, Iwata said today in parliament.

The DPJ will endorse Haruhiko Kuroda as central bank governor and Hiroshi Nakaso as one of the deputy governors, policy chief Mitsuru Sakurai said today in Tokyo. Current governor Masaaki Shirakawa will step down on March 19.

The yen has tumbled 8.1 percent this year, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 2.9 percent and the euro gained 1.5 percent.

Japan’s currency pared gains to the dollar after rallying as much as 0.7 percent, the biggest increase since Feb. 27.

“Our view is that the government has taken a strong stand with its nominations and they have enough support to get them approved,” Aroop Chatterjee, a currency strategist at Barclays Plc in New York, said in a telephone interview. “As a result I think you’re seeing dollar-yen retrace from those lows.”

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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