The yen slipped to the weakest level in almost two months versus the dollaron speculation that the Bank of Japan will boost stimulus measures sapped demand for the nation’s assets as a haven.
Japan’s currency was set for its longest run of declines against the dollar since March 2011 after Treasury yields reached the highest in a month relative to Japanese peers. The euro snapped a two-day gain versus the dollar as German Chancellor Angela Merkel said the region’s debt crisis won’t be solved in one go. The krona rose to a two-week high versus the euro as Sweden’s central bank governor said there are risks in keeping interest rates low.
“You have a lot of people speculating on the Bank of Japan easing,” said Kiran Kowshik, London-based currency strategist at BNP Paribas SA. “The yen weakness as well is about risk sentiment and we’ve seen Japanese investors, in terms of data, have been buying more foreign bonds. You could see upward pressure on yen crosses in anticipation of BOJ easing.”
The yen fell 0.4 percent to 79.26 per dollar at 8:50 a.m. New York time, the weakest since Aug. 22. It hasn’t fallen on six consecutive days since the period through April 1, 2011. The Japanese currency depreciated 0.3 percent to 103.84 per euro. It touched 104.07, the weakest since May 8.
The 17-nation common currency slipped 0.1 percent to $1.3104, after rising to $1.3140 yesterday, the strongest since Sept. 17.
Economic Projections
In Japan, central bank board members will release updated economic projections for the 2012 and 2013 fiscal years at month-end, along with the first set of forecasts for the 12 months beginning in April 2014. At their last meeting that ended on Oct. 5, BOJ officials held off from more easing after adding to stimulus in September.
The yen also weakened as the premium offered by 10-year U.S. note yields over benchmark Japanese government bonds increased this week. The difference, or spread, between the two rates was at 102 basis points today, compared with 105 basis points yesterday, the most since Sept. 14.
“Easing concern about the U.S. economy is also boosting appetite for riskier assets, driving Treasury yields and dollar- yen higher,” said Junichi Ishikawa, an analyst at IG Markets in Tokyo.
The yen weakened 4.8 percent in the past three months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 4.1 percent, the second biggest decline, while the euro rose 3 percent.
France’s President Francois Hollande called on the EU to press ahead on forming a banking union, provide economic help to countries that rein in budget deficits, and show investors that Greece will be able to stay in the monetary union if it keeps its commitments.
“We need to begin to execute these things, rapidly,” Hollande said in a joint interview published yesterday by six European newspapers. “Europe can’t afford to be late anymore.” Hollande and his 26 counterparts from other EU nations will begin a two-day summit today in Brussels.
Merkel, addressing German lower-house lawmakers before the EU leaders’ meeting, proposed a European Union “solidarity” fund to bolster competitiveness in struggling member countries.
Sweden’s krona appreciated 0.6 percent to 8.5962 against the euro, after rising to 8.5662, the strongest level since Oct. 5. It gained 0.4 percent to 6.5608 versus the dollar, after reaching 6.5320, the most since Sept. 28.
There are risks in keeping rates low for a long time that “can’t be ignored” as policy makers must take heed of financial stability and debt growth, Swedish central bank Governor Stefan Ingves wrote in an opinion article today in Svenska Dagbladet. The Riksbank last month predicted it would keep its benchmark interest rate at 1.25 percent over the next year and then raise rates as the global economy recovers.
