The yen dropped to almost the weakest since August 2009 after the lower house of parliament endorsed Haruhiko Kuroda, an advocate of increased stimulus, as the next central bank governor.
The Dollar Index reached the highest level since August as a report showed initial claims for unemployment insurance fell more than forecast last week. Japan’s currency fell versus 13 of its 16 major peers as Kuroda’s approval cleared the first hurdle in Prime Minister Shinzo Abe’s plan to install a central-bank leadership in favor of more monetary stimulus. Australia’s dollar climbed to a one-month high after a report showed payrolls rose to the highest in almost 13 years, dimming the outlook for interest-rate cuts.
“The focus there is on the transition of the new leadership of the Bank of Japan,” Eric Viloria, a senior currency strategist at Gain Capital Group LLC in New York, said of the yen. “The pace and aggressiveness of easing is going to be something that we’re keeping our eye on.”
Japan’s currency declined 0.4% to 96.47 per dollar at 9:08 a.m. in New York after depreciating to 96.71 on March 12, the weakest level since August 2009. Japan’s currency fell 0.2% 124.84 per euro. The dollar strengthened 0.2% to $1.2940 per euro, touching the strong level since December.
Japanese lawmakers in the lower house, which is dominated by the ruling coalition, also approved Abe’s nominees Kikuo Iwata and Hiroshi Nakaso for the two deputy governor posts. The upper house, where Abe’s Liberal Democratic Party lacks a majority, is scheduled to vote tomorrow.
The Bank of Japan will be determined to get inflation toward its 2% target and that “will undermine the yen,” said Derek Mumford, a director at Rochford Capital, a currency risk-management company in Sydney. “We can see dollar strength for another three or four weeks -- I wouldn’t stand in front of this decisive market.”
The yen has slumped 7.9% this year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 3.6% and the euro gained 1.4%.
“Our advice to clients remains to short the Japanese yen,” said Arne Rasmussen, head of currency research at Danske Bank A/S in Copenhagen. “The government’s plan to push for more stimulus to support growth is likely to go ahead now that Kuroda is confirmed.” A short position is a bet an asset will fall.