Yen weakens beyond 99 per dollar for first time since May 2009

Market Pricing

“We expect the market to price in extra policy announcements as we move towards the 26 April meeting,” Barclays Plc currency strategists including Chris Walker in London wrote in a note to clients. The bank forecasts the yen will drop to 103 per dollar within three months, compared with the median forecast for it to trade at 95 by the end of the second quarter, data compiled by Bloomberg show.

The yen pared declines earlier today after the Finance Ministry said Japan’s current-account surplus, the widest measure of trade, was larger than economists forecast.

The surplus was 637.4 billion yen in February compared with the median economist estimate of 457.5 billion yen in a Bloomberg News survey. The current account was in deficit for three months through January

The yen has slumped 21.2% in the past six months, the worst performance of 10 developed market currencies tracked by the Bloomberg Correlation Weighted Indexes. The dollar gained 1.7% and the euro climbed 2.1%.

Next Level

“Levels around 100 yen in the very short-term are definitely possible,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “Any doubts the BOJ would be very expansionary are off the table now and measures might even be increased if they find out it is not enough to create inflation.”

Demand for the dollar was limited before Bernanke speaks at the Fed Bank of Atlanta 2013 Financial Markets Conference today. The U.S. central bank’s next policy meeting is April 30-May 1.

The Fed is buying $85 billion of bonds a month in the third round of its quantitative-easing strategy to spur the economy. While policy makers reiterated after their March meeting the U.S. central bank will maintain its purchases until there’s significant improvement in the labor market, Bernanke told reporters the pace may be altered if warranted by a healing economy.

The South Korean won slid as heightened risk of conflict with North Korea spurred outflows of foreign funds. The currency weakened 0.8% to close at 1,140.15 per dollar in Seoul after depreciating to 1,140.36, the weakest since July 27.

‘Investors Nervous’

“Tensions with North Korea are intensifying, making investors nervous,” said Jeon Seung Ji, analyst at Samsung Futures Inc. in Seoul. Authorities “may try to take action if they find market reactions are excessive, while investors will also eye the yen-won movement.”

Global funds sold more Korean stocks than they bought, as they have on all but two days in the past three weeks after President Park Geun Hye’s office said the North may fire a missile around April 10.

North Korea last week warned embassies to evacuate as it won’t be able to guarantee the safety of foreign missions from April 10 in the event of a conflict. The regime told South Korean companies to leave the Gaeseong joint industrial complex by the same date.

Bloomberg News

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