Yen gains on speculation BOJ action is priced in

‘Backing Off’

“Quite a lot is priced in for the Bank of Japan to do, and there’s still a lot to happen,” said Geoff Kendrick, head of European currency strategy at Nomura International Plc in London. “Markets are backing off a bit. Short-term, we may need to see some action to sustain the move lower.”

The yen has tumbled 6.8% in the past month, the worst performer of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar weakened 0.4% and the euro gained 1%.

Sweden’s krona fell versus all its major counterparts after the minutes of the central bank’s Dec. 17 meeting showed deputy governors Per Jansson and Barbro Wickman-Parak “thought a great deal” about cutting the repurchase rate by half a percentage point last month.

The Riksbank on Dec. 18 lowered its benchmark by a quarter of a percentage point to 1%. While Deputy Governor Lars E.O. Svensson voted to cut the rate by 0.5% point, both Jansson and Wickman-Parak considered such a reduction before joining the majority decision of the six-person board, the minutes showed.

Krona Moves

The krona dropped 0.6% to 8.5818 per euro and slid 0.9% to 6.5601 per dollar.

Investors should sell the krona at 8.5650 per euro, targeting a decline to 8.80, BNP Paribas strategists led by Steven Saywell in London, wrote in a note to investors. The krone last traded at 8.80 per euro on Dec. 17.

The pound fell toward the weakest level in a month against the dollar after an industry report showed U.K. retail sales slowed in December, adding to signs Britain’s economy is lagging behind U.S. growth.

Sterling dropped before a Bank of England meeting this week at which policy makers are forecast to keep interest rates at a record low as they struggle to stoke a recovery. The U.K. economy shrank 0.1% last year, while the U.S. expanded 2.2%, according to a Bloomberg News surveys.

“U.S. growth is outperforming U.K. to such an extent that the last time we saw this kind of a differential was pretty much in the 1980s,” said Peter Kinsella, a senior foreign-exchange strategist at Commerzbank AG in London. “Definitely you’ll see lower levels in cable over the course of the year,” he said, referring to the pound-dollar exchange rate.

The pound dropped 0.4% to $1.6056 after falling to $1.6010 on Jan. 4, the lowest level since Dec. 7. The U.K. currency was little changed at 81.45 pence per euro.

Bloomberg News

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