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.
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.
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.