The yen rose versus a majority of its 16 most-traded counterparts as Cyprus’s banks reopened for the first time since striking a bailout deal that forced losses on some depositors, spurring demand for the safest assets.
Japan’s currency strengthened as the Bank of Japan reiterated its policy-easing options, damping speculation for additional novel measures to boost the economy. The euro rose from a four-month low against the dollar. Mexico’s peso has been the best performer against the dollar among its 16 major peers this month and this quarter.
“The yen is stronger partly because of the safety principle,” said Steven Barrow, head of Group of 10 research at Standard Bank Plc in London. “The markets may be sensitive to the news around the reopening of banks in Cyprus. The market is well set up for something reasonably aggressive from the BOJ so the downside risks for the yen against the dollar are limited.”
The yen gained 0.4% to 94.09 per dollar at 10:21 a.m. New York time. Japan’s currency lost 0.1% to 120.79 per euro. The 17-nation euro rose 0.4% to $1.2835. It touched $1.2751 yesterday, the least since Nov. 21.
Mexico’s peso has gained 3.5% to the greenback in the past month, while South Korea’s won has declined 2.7%. This quarter, the Mexican currency has rallied 4.1% and South Africa’s rand has depreciated 8%.
The rand today gained the most in two weeks as the nation’s trade deficit narrowed in February from a record in the previous month. South Africa’s currency rose 0.5% to 9.2127 per dollar.
The Australian dollar fell for a second day against Japan’s currency as Italy’s inability to form a government and Cyprus’s bailout damped demand for riskier assets. The so-called Aussie fell 0.7% to 97.98 yen.
The European Central Bank is scheduled to make its next policy announcement on April 4. The central bank has held its benchmark interest-rate at 0.75% since July.
The Central Bank of Cyprus’s capital controls will include a 300-euro ($384) daily limit on withdrawals and restrictions on transfers to accounts outside the country. Banks opened at midday. They will close at 6 p.m. local time, Yiangos Dimitriou, head of the central bank’s audit department, said yesterday in comments broadcast on state-run CyBC television.
The European Commission said in a statement the control on capital movements must remain “proportionate” and be lifted as soon as possible.
“Euro has come down quite a bit this week,” Robert Lynch, a New York-based currency strategist at HSBC Holdings Plc, said in a telephone interview. “That contagion element has been problematic for the euro in the past and had contributed to the euros’ weakness yesterday, and you don’t have that today. With the more stable backdrop, I think that’s probably contributing to euro’s performance today.”
The Federal Labor Agency said the number of people out of work in Germany increased a seasonally adjusted 13,000 to 2.94 million. Economists had predicted a decline of 2,000, according to the median of 24 estimates in a Bloomberg News survey.
The euro has dropped 0.4% in the past three months, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar has risen 2.9%, while the yen dropped 7%, the worst performer.
BOJ Governor Haruhiko Kuroda told parliament’s upper house today that policy makers need to lower yields on longer-maturity government bonds and that purchases of risk assets may also be needed. The comments echoed lower-house testimony on March 26, when Kuroda pledged to buy more government bonds to reach the BOJ’s inflation goal. The central bank will discuss policy on April 3-4.
“Kuroda’s been talking up more aggressive easing and stamping out deflation,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “If the governor does what’s expected, we’ll probably see limited reaction. There’s probably more risk that the yen strengthens than weakens.”