By Masaki Kondo - Dec 26, 2012 11:31 AM GMT+0400
A dealer works in front of a monitor displaying the exchange rate of the yen against the U.S. dollar at a foreign exchange brokerage in Tokyo. Photographer: Akio Kon/Bloomberg
The yen weakened past 85 per dollar for the first time since April 2011 as Shinzo Abe was approved as Japan’s prime minister today amid expectations he will push the central bank to increase cash infusions into a deflation- plagued economy.
The yen slid versus all its major peers as minutes of the Bank of Japan (8301)’s November meeting showed that a board member suggested conducting open-ended asset purchases. Markets in Australia and the U.K. were shut for a holiday. South Korea’s won was near the highest in 15 months as overseas investors bought local shares. U.S. Congress will return tomorrow to continue negotiations on averting the so-called fiscal cliff.
A dealer works in front of a monitor displaying the exchange rate of the yen against the U.S. dollar at a foreign exchange brokerage in Tokyo. Photographer: Akio Kon/Bloomberg
“Any comments from the Abe administration that imply additional pressure for monetary easing will be a selling catalyst for the yen,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo. “With this thin market liquidity, the exchange rates are more likely to move bigger.”
The Japanese currency dropped 0.6 percent to 85.29 per dollar as of 4:21 p.m. in Tokyo after earlier touching 85.36, the weakest since April 8, 2011. It depreciated to 112.58 per euro, a level unseen since August 2011, before trading 0.6 percent lower from yesterday at 112.47. The European currency added 0.1 percent to $1.3189.
The yen’s slide accelerated after the currency hit 85 per dollar, triggering stop-loss orders, according to Yousuke Hosokawa, the foreign-exchange head in Tokyo at the marketing unit of Sumitomo Mitsui Trust Bank Ltd. A stop-loss order is an automatic instruction to buy or sell a currency at a certain level to limit losses.
Inflation Target
Both houses of Japan’s parliament confirmed Abe as the nation’s seventh prime minister in six years, returning him to the office he left in 2007.
Abe yesterday agreed with the New Komeito Party, the coalition partner of his Liberal Democratic Party, on a policy package that includes a 2 percent inflation target. The LDP, which swept to power in lower house elections on Dec. 16, has called for “bold monetary easing” by the BOJ to spur inflation and growth.
An unnamed BOJ board member said that an option would be to “clearly present” in a policy statement that the central bank would continue monetary easing, including asset purchases, “without setting any time frame” until 1 percent inflation is achieved, the minutes showed. The BOJ’s 76 trillion-yen ($891 billion) program that buys securities ranging from government bondsto stock funds will expire at the end of next year.
‘Dovish Message’
“A dovish message came through loud and clear,” Gareth Berry and Geoffrey Yu, foreign-exchange strategists at UBS AG, wrote in a research note today about the minutes. “It would appear that the sands are shifting not just in Japan’s political arena, but amongst BOJ policy board members as well.”
Japan’s consumer prices excluding fresh food probably slid 0.1 percent in November from a year earlier, according to the median estimate of economists in a Bloomberg News survey before the data due to be released on Dec. 28. The so-called core inflation rate has fallen an average of 0.2 percent every month in the past decade.
The yen has tumbled 13 percent this year, the biggest drop among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar is the second-worst performer with a 2.8 percent slide, while the euro has lost 0.9 percent.
Korean Won
South Korea’s won rose 0.1 percent to 1,073.28 per dollar after touching 1,070.73 on Dec. 18, the strongest since September 2011. Money managers outside the country bought more shares than they sold every day this month, according to Korea Exchange, bringing the total of net purchases to $3.3 billion in December.
“Overseas investors’ net purchases of Korean stocks and cross trades of selling the yen and buying the won are the biggest issues in the currency market preventing the won from weakening,” said Byeon Ji Young, a Seoul-based currency analyst at Woori Futures Co.
U.S. President Barack Obama plans to leave his Hawaii vacation today and return toWashington, a White House aide said on condition of anonymity. Congress will resume negotiations tomorrow over more than $600 billion in tax increases and spending cuts due to take effect next month.
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
