The yen touched the weakest level versus the dollar since June 2010 on bets Japanese Prime Minister Shinzo Abe will select a central-bank chief who will expand monetary easing, accelerating the currency’s decline.
Japan’s currency slid beyond 120 per euro for the first time since May 2011 after Abe, who’s called for a higher inflation target, said he wanted someone “who can push through bold monetary policy” as the next Bank of Japan governor. The BOJ meets next week. The dollar fell to a 10-month low versus the euro after Federal Reserve Bank of Chicago President Charles Evans said the U.S. should keep monetary policy accommodative.
“There continue to be expectations that there will be more easing from the BOJ,” Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York, said in a telephone interview. “There are a lot of expectations there will be a new inflation target, and it’s contributed to a run on the yen.”
The yen depreciated 0.1 percent to 89.25 per dollar at 9:14 a.m. New York time after reaching 89.67, the weakest level since June 25, 2010. Japan’s currency slipped 0.1 percent to 119.18 per euro and reached 120.13, a level not seen since May 4, 2011. The dollar was little changed at $1.3353 per euro after reaching $1.3404, the weakest since Feb. 29.
Japanese financial markets were shut today for a holiday.
Kiwi, Pound
The New Zealand dollar, nicknamed the kiwi, climbed against all of its 16 most-traded counterparts after a report today showed an advance in retail spending. The currency advanced 0.7 percent to 84.23 U.S. cents and gained 0.8 percent to 75.17 yen.
Sterling weakened for a seventh day versus the euro as pressure intensified for the government to renegotiate the terms of its European Union membership. The pound declined 0.6 percent to 83.21 pence per euro and fell 0.6 percent to $1.6043.
The Swiss franc dropped as European leaders said the worst is probably over for the region’s sovereign-debt crisis. Investors used the currency as a haven as the financial turmoil dented European asset values. The franc slid 0.6 percent to 1.2258 per euro and touched 1.2277, its lowest level since December 2011.
The kiwi increased 2.3 percent over the past year compared to nine developed-nation peers monitored by the Bloomberg Correlation-Weighted Indexes. The pound added 1 percent, while the dollar fell 4.1 percent and the yen lost 19 percent in the biggest decline.
The next BOJ governor must be a “bold policy leader,” Abe said yesterday on public broadcaster NHK’s “Sunday Debate” program. BOJ Governor Masaaki Shirakawa is due to speak tomorrow at a meeting of branch managers. He plans to step down in April after two of his deputies exit in March.
Inflation Goal
The central bank will review its 1 percent inflation goal at its Jan. 21-22 policy meeting. Abe, whose Liberal Democratic Party swept to power in elections last month, has demanded the central bank double the target.
“It just seems that the government has the yen back in its hands and really has built up a lot of credibility,” Hong-Kong based Sacha Tihanyi, a senior currency strategist at Scotiabank, said today in an interview on Bloomberg Television.
The yen weakened 11 percent against the dollar in 2012, the most in seven years. The currency is still stronger than its 10- year average of about 101, hurting the competitiveness of Japanese exporters. Domestic manufacturers want the currency to trade between 90 and 100, Hiroshi Tomono, president of Nippon Steel & Sumitomo Metal Corp. said on Jan. 7 in Tokyo.
U.S. Treasuries
Abe is set to become the best friend of investors in U.S. Treasuries as Japan’s prime minister buys U.S. government bonds to weaken the yen and boost his nation’s slowing economy.
The Japanese leader’s Liberal Democratic Party pledged to consider a fund to buy foreign securities that may amount to 50 trillion yen ($558 billion) according to Nomura Securities Co. and Kazumasa Iwata, a former Bank of Japan deputy governor. JPMorgan Securities Japan Co. says the total may be double that. The purchases would further weaken the currency.
The dollar dropped for a third day against the euro after Evans said at a forum in Hong Kong that the Fed should keep policy accommodative to support the economy and “too much austerity too soon could be very damaging to near- and medium- term growth.”
Republicans are calling for a reduction in federal expenditures as a clash looms over raising the government’s borrowing limit, after President Barack Obama and U.S. lawmakers agreed to avert $600 billion in automatic spending cuts and tax increases that had been scheduled to start this month.
Euro Appreciation
The euro may appreciate to $1.35, the strongest level since December 2011, after last week advancing through so-called resistance at $1.33 to $1.3310, JPMorgan Chase & Co. said.
The currency may rise to the $1.3480 to $1.35 area, which represents the 50 percent Fibonacci retracement of its decline from May 2011 to July 2012, Niall O’Connor, a New York-based technical analyst at JPMorgan, wrote in a note to clients.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Resistance refers to an area on a price graph where analysts anticipate sell orders to be clustered.
