The yen reached the weakest since June 2010 versus the dollar after Japanese Prime Minister Shinzo Abe’s government said it will spend 10.3 trillion yen ($116 billion) in new stimulus efforts that tend to weaken a currency.
The euro climbed after Goldman Sachs Group Inc. strategist Thomas Stolper wrote in a note that the shared currency may rise to $1.37. The yen headed for a ninth weekly decline, the longest losing streak since 1989, on speculation the Bank of Japan is also preparing measures to spur growth. South Korea’s won gained to the strongest level against dollar in 17 months after the central bank kept interest rates unchanged.
“Abe announced fiscal stimulus in Japan, which is what sent the yen lower against the dollar,” Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York, said in a telephone interview. “We were expecting some sort of fiscal program, and they basically put some flesh on the bone.”
The yen fell 0.4 percent to 89.17 per dollar at 11:50 a.m. in New York and reached 89.45, the weakest level since June 28, 2010. The Japanese currency depreciated 1 percent to 119.04 per euro and touched 119.35, the least since May 2011. The euro climbed as much as 0.7% to $1.3366, the highest since April 3, before trading at $1.3353, up 0.6%.
The won advanced 0.5% to 1,054.69 per dollar, the strongest level since August 2011.
Japan’s government will spend about 3.8 trillion yen on disaster prevention and reconstruction, and 3.1 trillion yen on stimulating private investment and other measures, the Cabinet Office said in a statement.
BOJ Meeting
The Bank of Japan is set to adopt the 2% inflation target advocated by Abe, doubling its existing goal of 1%, without setting a deadline for achieving it, according to people familiar with discussions within the central bank. They requested anonymity because the talks are private. The BOJ meets on Jan. 21-22.
“We needed to see further news flow to maintain the weakness in the yen, and we’ve seen that,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The BOJ are signing up to the government’s policy stance. For now, everyone is getting on to this train, and the question now is how far the yen can weaken.”
The yen’s 2.3% drop in the past week was the biggest among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar lost 1%, while the euro rose 1.4%.
Swiss Franc
The Swiss franc slid to the weakest level in more than a year against the euro after a government report showed Switzerland’s consumer prices extended their longest slump in at least four decades.
The franc declined after Zuercher Kantonalbank said yesterday it reserved the right to set negative interest rates on franc deposits for its retail customers. The Swiss National Bank imposed a ceiling for the franc of 1.20 versus the euro in September 2011 to combat the threat of deflation.
“If traders needed any other reason to go long on the euro versus the franc, they got it today with the release of Swiss CPI,” Peter Rosenstreich, chief foreign-exchange strategist at Swissquote Bank SA in Geneva, wrote today in a note to clients. A long position is a bet an asset will gain.
The franc lost as much as 0.6% to 1.2201 per euro, the weakest since December 2011, before trading at 1.2175, down 0.4%. The Swiss currency rose 0.3% to 91.18 centimes per dollar.
The Bloomberg-JPMorgan Asia Dollar Index rose 0.3% this week to 118.66 and reached 118.73 today, the highest since September 2011.
Improved Sentiment
China, the top destination for exports from South Korea, Taiwan, Malaysia and Thailand, said yesterday that imports gained 6% in December, the fastest growth in six months. Exports climbed 14%, the most since May.
“Sentiment toward China has improved,” said Adam Cole, global head of foreign-exchange strategy at Royal Bank of Canada in London. “That’s helping the Asian currencies.”
South Africa’s rand slid versus all of its major counterparts a day after Fitch Ratings cut the nation’s credit rating because of slowing economic growth, a widening budget deficit and rising unemployment. The currency weakened 1% to 8.7377 to the dollar.
The Australian dollar weakened versus the greenback as its failure to break through resistance at $1.06 signaled gains in the currency may have been too rapid. The Aussie fell 0.6% to $1.0540 after being unable to exceed $1.0599, the highest since Sept. 14, for a second straight day. Resistance is a level on a chart where sell orders may be clustered.
Relative Strength
The Australian dollar’s 14-day relative strength index versus the greenback reached 68 yesterday, near the 70 level that some traders see as a sign it has risen too quickly and may be due to reverse course.
The euro headed for a weekly gain versus all 16 of its most-traded counterparts. It last reached $1.37, Goldman Sachs’s target, in November 2011.
European Central Bank President Mario Draghi said yesterday the economy should regain momentum after policy makers left the main refinancing rate at a record low of 0.75% at a meeting in Frankfurt.
