The yen gained versus the dollar, erasing yesterday’s loss, amid speculation a decision tomorrow by the Bank of Japan will signal its monetary-easing efforts will fall short of its goals and fail to reignite inflation.
The greenback declined against most major peers as a private report showed U.S. companies added fewer jobs in March than forecast. Japanese Prime Minister Shinzo Abe said yesterday the BOJ may fail to achieve its target of boosting inflation to 2%. The euro rose earlier from a five-week low against the yen after the International Monetary Fund said it would provide 1 billion euros ($1.28 billion) of aid to Cyprus.
“The bulk of the dollar positions on right now are probably in dollar-yen,” Geoffrey Yu, a senior currency strategist at UBS AG in London, said in a telephone interview. “It’s more of a bit of nervousness heading into the BOJ decision.”
The yen climbed 0.4% to 93.08 per dollar at 9:51 a.m. in New York after losing 0.2% yesterday. The U.S. currency weakened 0.2% to $1.2849 per euro. Europe’s shared currency fell 0.1% to 119.62 yen after dropping to 119.15 yesterday, the lowest level since Feb. 26.
Australia’s dollar gained versus all of its 16 most-traded counterparts after the nation’s trade deficit shrank to a 14- month low. Bureau of Statistics data showed exports rose 3% in February from a month earlier, imports fell 1% and the trade gap narrowed to A$178 million ($186 million). Economists surveyed by Bloomberg predicted a A$1 billion shortfall.
“The Aussie was braced for another large deficit, and it got something close to balance,” said David de Garis, a senior economist at National Australia Bank Ltd. in Melbourne. “If this is a sign that the export expansion is coming through, it plays into the wider growth story.”
Australia’s currency appreciated 0.4% to $1.0489 and was little changed at 97.66 yen.
The BOJ will say tomorrow it will boost monthly bond purchases by about 50% to 5.2 trillion yen, according to the average forecast in a survey of economists by Bloomberg.
“Yen weakness is not over,” Callum Henderson, head of currency research at Standard Chartered Plc in Singapore, said in a Bloomberg Television interview. “We do expect fireworks at the Bank of Japan policy-meeting results.”
The yen has tumbled 16% against the dollar and 15% against the euro during the past six months.
The Dollar Index fell 1% to 82.822.
Roseland, New Jersey-based ADP Research Institute reported a 158,000-job increase in employment by companies, the smallest since October, after a revised 237,000 gain the prior month. The median forecast of 39 economists surveyed by Bloomberg called for a 200,000 advance.
The data came two days before the Labor Department issues its report on U.S. nonfarm payrolls. Employers added 198,000 jobs in March, economists surveyed by Bloomberg forecast. Payrolls increased by 236,000 in February, more than forecast.
IMF Managing Director Christine Lagarde announced a staff- level agreement with Cyprus today on the 10 billion-euro program agreed to on March 25. The deal calls for Cyprus to restructure its two largest banks, reduce budget deficits and adjust its wage and pension systems.
“This is a challenging program that will require great efforts from the Cypriot population,” Lagarde said in a statement. “We believe that it provides a durable and fully financed solution to the underlying problems facing Cyprus and provides a sustainable path toward a recovery.”
The euro weakened 1.8% over the past month among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes, the worst performance. The dollar fell 0.3% and the yen gained 0.2%.
The European Central Bank’s Governing Council meets tomorrow to decide on interest rates. Of 56 economists surveyed by Bloomberg News, 54 expect the central bank to keep its main refinancing rate at a record-low 0.75%, while two predict a reduction.
“There is some euro bearishness ahead of the ECB,” said Raghav Subbarao, a currency strategist at Barclays Plc in London. “Cyclical data has been extremely weak and European growth prospects look dim compared to the rest of the world.”