By Anchalee Worrachate & Candice Zachariahs - Aug 23, 2013 4:56 AM PT
The yen fell to the lowest level in almost three weeks against the dollar on speculation Bank ofJapan Governor Haruhiko Kuroda will reiterate the case for monetary easing at the Federal Reserve’s annual conference.
The euro headed for a second weekly gain versus the yen as European Central Bank Governing Council member Ewald Nowotny said good economic news removed the need for further interest-rate cuts. The dollar was poised for a weekly gain against most major peers as data backed the case for the Fed to reduce stimulus. Emerging-market nations boosted efforts to halt currency losses, with Brazil announcing an intervention program and Indonesia planning to reduce its current-account deficit.
Aug. 23 (Bloomberg) -- European Central Bank Governing Council Member Ewald Nowotny talks about the recent "stream of good news" from the euro-area economy and the outlook for interest rates. He spoke yesterday with Bloomberg Television's Mike McKee in Jackson Hole, Wyoming. (Source: Bloomberg)
“Markets will likely focus on any views Kuroda holds on the implementation on fiscal changes and how that could affect his outlook for monetary policy,” said Geoffrey Yu, senior foreign-exchange strategist at UBS AG in London. “There may be pressure on him to act to offset any growth drags arising from greater fiscal restraint. We expect the market to look to get back into long dollar versus yen positions before the Fed’s September meeting.”
The yen declined 0.3 percent to 99.05 per dollar at 7:53 a.m. in New York after depreciating to 99.14, the weakest level since Aug. 5. Japan’s currency dropped 0.4 percent to 132.30 per euro, having fallen 1.8 percent this week. The euro was little changed at $1.33556
Kuroda will take part in a panel discussion tomorrow at the three-day Jackson Hole, Wyoming, conference. The BOJ doubled its monthly bond purchases to more than 7 trillion yen in April to stoke 2 percent inflation in two years.
Yen’s Slide
Kuroda backed a planned sale-tax increase aimed at reducing the nation’s debt. If a higher levy or changing conditions overseas heightened the risk of a slowdown, the central bank “won’t hesitate” to add to its unprecedented easing policy, Mainichi newspaper reported on Aug. 21, citing an interview.
The yen has tumbled 20 percent in the past 12 months, the worst performer among the 10 developed-market currencies tracked by the Bloomberg Correlation Weighted Indexes. The dollar strengthened 3.3 percent and the euro gained 11 percent.
The euro was poised for a weekly gain versus all of its 16 major counterparts after Nowotny, who heads Austria’s central bank, said in an interview with Bloomberg Television in Jackson Hole, yesterday that he did “not see many arguments now for a rate cut.”
At the same time, he ruled out an early monetary tightening, saying “the most recent developments will have no immediate effects on the policy of the European Central Bank.”
Draghi Pledge
With the euro area emerging from its longest-ever recession last quarter, ECB officials led by President Mario Draghi are seeking to damp speculation they will shift to tighter policy prematurely. Draghi has pledged to keep the ECB’s benchmark rate at a record low of 0.5 percent for an “extended period.”
“Nowotny’s remarks spurred euro buying,” said Yuji Saito, the director of foreign-exchange at Credit Agricole Corporate & Investment Bank in Tokyo. “The euro region’s economy is improving.”
The dollar gained for a third day against the yen after minutes from the Federal Open Market Committee’s July 30-31 gathering, released this week, showed most policy makers backed the case for a reduction in stimulus.
The FOMC will reduce its monthly purchases of $85 billion in bonds at its next meeting on Sept. 17-18, according to 65 percent of economists in an Aug. 9-13 Bloomberg survey. The median estimate is a cut to $75 billion each month.
Dollar Index
Ben S. Bernanke, who has given the introductory speech every year since becoming Fed chairman in 2006, has passed up on the annual monetary conference underway in Jackson Hole.
The Bloomberg U.S. Dollar Index, which tracks the currency against a basket of its 10 major counterparts, was little changed at 1,029.12 after climbing to 1,031.37 yesterday, the highest level since Aug. 2.
Brazil stepped up efforts to arrest the world’s worst currency decline, announcing a $60 billion intervention program involving currency swaps and loans.
Starting today, the central bank will auction $1 billion of dollar loans every Friday and offer the equivalent of $500 million of foreign-exchange swaps a day on Mondays, Tuesdays, Wednesdays and Thursdays, according to a statement late yesterday. The program will run through Dec. 31.
Indonesia’s rupiah rebounded from a four-year low after the central bank announced measures to boost foreign-currency supply. The rupiah gained 0.4 percent to 10,780 per dollar.
The rupee jumped 2 percent to 63.3525 per dollar.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
