Monday, 8 April 2013

Yen Weakens Beyond 99 per Dollar for First Time Since May 2009

By Neal Armstrong & Candice Zachariahs - Apr 8, 2013 2:51 PM GMT+0400

Tomohiro Ohsumi/Bloomberg
A dealer works in front of a monitor displaying the the exchange rate of the yen against the U.S. dollar at a foreign exchange brokerage in Tokyo, on April 8, 2013.
The yen weakened beyond 99 per dollar for the first time since May 2009 on speculation Bank of Japan (8301) measures to fight deflation announced last week will further debase the currency.
April 8 (Bloomberg) -- Paul Sheard, chief global economist at Standard & Poor's, talks about Japan's economy and central bank monetary policy. He also discusses the outlook for the U.S. economy. He speaks from the Boao Forum for Asia in Hainan, China, with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
April 8 (Bloomberg) -- Richard Boucher, deputy secretary-general of the Organization for Economic Cooperation and Development, talks about the outlook for global growth including Japan and U.S. economies. He speaks with Susan Li on Bloomberg Television's "First Up" from the Boao Forum for Asia in Hainan, China. (Source: Bloomberg)
April 8 (Bloomberg) -- Sebastien Galy, a foreign-exchange strategist at Societe Generale SA, discusses the yen and the Internet currency Bitcoin. He speaks from New York with Francine Lacqua and Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)
April 8 (Bloomberg) -- Christoph Stuermer, research director at IHS Automotive, talks about the impact of weak yen on carmakers and suppliers and the outlook for the European car market. He speaks from Frankfurt Francine Lacqua and Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Audio Download: Kuroda's Brave New Monetary Era Challenges Abe: View, 4/5
Yen Drops to Lowest Since June 2009 Against Dollar on BOJ Moves Bank of Japan officials said April 4 the central bank will increase its monthly bond purchases to 7.5 trillion yen ($77 billion), exceeding the 5.2 trillion yen forecast by economists surveyed by Bloomberg. Photographer: Kiyoshi Ota/Bloomberg
The yen dropped against all its 16 major counterparts for a third day after BOJ officials said last week they will boost monthly bond purchases to 7.5 trillion yen ($76 billion), exceeding the 5.2 trillion yen forecast by economists surveyed by Bloomberg News. The dollar declined for a fourth day versus the euro before Federal Reserve Chairman Ben S. Bernanke speaks today. South Korea’s won slid to an eight-month low as military tensions on the Korean peninsula escalated.
“Levels around 100 yen in the very short-term are definitely possible,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “Any doubts the BOJ would be very expansionary are off the table now and measures might even be increased if they find out it is not enough to create inflation.”
The yen fell 1.1 percent to 98.66 per dollar at 6:50 a.m. New York time after sliding to 99.01, the weakest level since May 8, 2009. The currency tumbled 3.4 percent last week. The yen declined 1.3 percent to 128.48 per euro after depreciating to 128.84, the least since January 2010. The dollar dropped 0.3 percent to $1.3024 per euro.
Commerzbank predicts the yen will weaken to 115 per dollar by year-end, after an earlier forecast of 100, Karpowitz said.

Further Weakness

The BOJ on April 4 also suspended a cap on some bond holdings and dropped a limit on debt maturities. Policy makers set a two-year horizon for their goal of 2 percent inflation. The central bank’s next policy meeting is on April 26.
“We expect the market to price in extra policy announcements as we move towards the 26 April meeting,” Barclays Plc currency strategists including Chris Walker in London wrote in a note to clients. The bank forecasts the yen will drop to 103 per dollar within three months, compared with the median forecast for it to trade at 95 by the end of the second quarter, data compiled by Bloomberg show.
The yen pared declines earlier today after the Finance Ministrysaid Japan’s current-account surplus, the widest measure of trade, was larger than economists forecast.
The surplus was 637.4 billion yen in February compared with the median economist estimate of 457.5 billion yen in a Bloomberg News survey. The current account was in deficit for three months through January
The yen has slumped 21 percent in the past six months, the worst performance of 10 developed market currencies tracked by the Bloomberg Correlation Weighted Indexes. The dollar gained 1.6 percent and the euro climbed 2.1 percent.

Bernanke Speech

Demand for the dollar was limited before Bernanke speaks at the Fed Bank of Atlanta 2013 Financial Markets Conference today. The U.S. central bank’s next policy meeting is April 30-May 1.
The Fed is buying $85 billion of bonds a month in the third round of its quantitative-easing strategy to spur the economy. While policy makers reiterated after their March meeting the U.S. central bank will maintain its purchases until there’s significant improvement in the labor market, Bernanke told reporters the pace may be altered if warranted by a healing economy.
The South Korean won slid as heightened risk of conflict with North Korea spurred outflows of foreign funds. The currency weakened 0.8 percent to close at 1,140.15 per dollar in Seoul after depreciating to 1,140.36, the weakest since July 27.

‘Investors Nervous’

“Tensions with North Korea are intensifying, making investors nervous,” said Jeon Seung Ji, analyst at Samsung Futures Inc. in Seoul. Authorities “may try to take action if they find market reactions are excessive, while investors will also eye the yen-won movement.”
Global funds sold more Korean stocks than they bought, as they have on all but two days in the past three weeks after President Park Geun Hye’s office said the North may fire a missile around April 10.
North Korea last week warned embassies to evacuate as it won’t be able to guarantee the safety of foreign missions from April 10 in the event of a conflict. The regime told South Korean companies to leave the Gaeseong joint industrial complex by the same date.
To contact the reporters on this story: Neal Armstrong in London at; Candice Zachariahs in Sydney at
To contact the editor responsible for this story: Paul Dobson at