Tuesday, 9 April 2013

Yen Strengthens From Four-Year Low Versus Dollar; Aussie Rises

By Neal Armstrong - Apr 9, 2013 3:12 PM GMT+0400

The yen strengthened from the lowest in almost four years against the dollar on speculation its 6.4 percent slump against the greenback in the past three days was too rapid.
Japan’s currency advanced versus all except one of its 16 major counterparts after earlier sliding to 99.66 per dollar, the weakest level since May 2009. Australia’s currency advanced for a second day as monetary stimulus in the U.S. and Japan boost demand for higher-yielding assets. Thailand’s baht climbed to the strongest since 1997 against the greenback as demand for the nation’s bonds rose.
Yen Declines for Fourth Day, Approaching 100 Versus Dollar One-hundred euro, from top, U.S. one-hundred dollar, and ten-thousand yen banknotes. Photographer: Kiyoshi Ota/Bloomberg
April 8 (Bloomberg) -- FX Concepts Chief Strategist Bob Savage discusses the yen, euro and dollar on Bloomberg Television's "Lunch Money." (Source: Bloomberg)
April 9 (Bloomberg) -- Tim Condon, Singapore-based head of research for Asia at ING Groep NV, talks about the outlook for Japan's economy, yen and the nation's stock market. Condon also discusses and the outlook for China's economy. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
“We haven’t been at 100 for a long time and there’s a lot of barriers around there,” said Geoff Kendrick, head of European currency strategy at Nomura International Plc in London. “The yen will probably go through 100 versus the dollar shortly and then slow down.”
The yen gained 0.5 percent to 98.98 per dollar at 7:05 a.m. in New York after earlier weakening as much as 0.3 percent. Japan’s currency rose 0.3 percent to 129.02 per euro. The euro strengthened 0.2 percent to $1.3040.
The yen strengthened today after its 14-day relative strength index against the greenback dropped to 27 yesterday, below the level of 30 that some traders see as a sign an asset has fallen too quickly.
BOJ officials led by Governor Haruhiko Kuroda said after a policy meeting last week they would boost monthly bond purchases to 7.5 trillion yen as they set a two-year horizon for their goal of 2 percent inflation. They suspended a cap on some bond holdings and dropped a limit on debt maturities.

Worst Performer

The yen has slumped 22 percent in the past six months, the worst performer of the 10 developed-market currencies tracked by Bloomberg Correlation Weighted Indexes, on the government’s pledge to increase stimulus to end 15 years of deflation. The dollar climbed 1.2 percent and the euro gained 2.6 percent.
Three-month implied volatility for the yen against the dollar fell to 13.1 percent today after climbing to 13.6 percent, the highest level since March 2011.
The yen is near a key Fibonacci level that may temporarily interrupt its decline, according to Max Knusden, a currency analyst at ADS Securities LLC in Abu Dhabi.
“Prices have almost reached this week’s first key profit- taking target at 99.72, a 50 percent recovery to the bear market between 2007 and 2011,” he wrote in a note to clients. “As an important target for sentiment, some profit taking is likely.”
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a new high or low.

Aussie Gains

The Australian dollar advanced against all of its 16 major peers as the BOJ stepped up bond purchases, or so-called quantitative easing, at its April 3-4 meeting.
“It’s QE everywhere,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “We’re not engaging in that practice so the Aussie dollar should strengthen against the euro, U.S. dollar and yen simply on the basis of the interest- rate structure and a relative lack of supply.”
The Australian dollar appreciated 0.5 percent to $1.0463 after gaining 0.3 percent yesterday. The currency was little changed at 103.51 yen after rising to 103.82 yen, the highest since July 2008.
Thailand’s baht strengthened beyond 29 per dollar for the first time since 1997 as demand for the nation’s bonds rose amid unprecedented monetary easing in Japan.
“With floods of cash in Japan where rates are so low, investors are seeking higher returns and in this region, Thailand looks good thanks to its stable economy and political situation,” saidTsutomu Soma, manager of Rakuten Securities Inc.’s fixed-income business unit department inTokyo. “The weaker yen won’t be harmful for Thailand as it doesn’t compete with Japan, unlike South Korea or China.”
The baht climbed 0.7 percent to 29.04 per dollar after appreciating to 28.93, the strongest since July 1997.
To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net