The yen weakened past 85 per dollar for the first time since April 2011 as Japan’s Prime Minister Shinzo Abe said he would push for “bold monetary easing.”
The yen slid versus all its major peers as minutes of the Bank of Japan’s November meeting showed that a board member suggested conducting open-ended asset purchases. The Dollar Index was little changed for a third day as investors waited for U.S. Congress and President Barack Obama to resume talks on averting the so-called fiscal cliff. Brazil’s real rose before the central bank was scheduled to auction currency credit lines.
“Using the central bank to weaken the currency is viewed as win-win in a deflationary economy,” said Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York. “He obviously feels he has a mandate and so far he has been going further, faster in advocating BOJ ease than was expected.”
The Japanese currency depreciated 0.7 percent to 85.35 per dollar at 9:04 a.m. New York time, after touching the weakest level since April 7, 2011. It depreciated 0.9 percent to 112.70 per euro, reaching the least since August 2011. The European currency added 0.2 percent to $1.3205.
Markets in Canada, Australia and the U.K. were shut for a holiday.
The yen has tumbled 13.4 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 0.8 percent.
The losses for the Japanese currency have accelerated in December, with it declining 3.4 percent versus the dollar, bringing its quarter-to-date loss to 8.7 percent. The real is the best-performer this month against the 16 major currencies tracked by Bloomberg, advancing 4.3 percent versus the dollar. That pares its loss since the end of September to 1.1 percent.
The yen’s slide accelerated today 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.
A further decline in the yen against the euro and dollar may be limited as the 14-day relative strength index for both pairs remains below the 30 level, which indicates price moves are extreme and may be due for a rebound. The gauge was 22.8 versus the euro and 21.3 against the greenback.
Brazil’s real gained against all its major counterparts, rising 1.5 percent to 2.0481 per dollar. The central bank is scheduled to auction as much as $2 billion in currency swaps.
Obama plans to leave his Hawaii vacation today and return to Washington, a White House aide said on condition of anonymity. Congress will resume negotiations tomorrow about more than $600 billion in tax increases and spending cuts due to take effect next month.
The Dollar Index, which tracks the currency against those of six major trading partners was little changed at 79.634.
Abe in a speech in Tokyo today said he would also carry out a flexible fiscal policy. Taro Aso was named finance chief today. During his 12 months as prime minister through September 2009, the one-time Olympian compiled three extra budgets worth about 20 trillion yen, abandoned a target to balance the budget by March 2012 and distributed a 12,000 yen-per-person cash handout.
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 ($890 billion) program that buys securities ranging from government bonds to stock funds will expire at the end of next year.
“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.”