The yen fell for a fourth day against the dollar after Finance Minister Taro Aso said Japan’s stimulus policies that have caused the currency to weaken were unopposed at a Group-of-20 meeting in Washington.
The Japanese currency dropped at least 1.1% versus all its 16 major counterparts amid speculation of further easing that has helped the currency slide 20% against the dollar in the past six months. The euro briefly extended a gain versus the greenback after German Finance Minister Wolfgang Schaeuble said the European Central Bank is doing “everything right” on monetary policy and should reduce liquidity in the euro area. South Korea’s won gained.
“The move has been triggered by the finance minister’s comments that we saw overnight,” Sireen Harajli, a foreign- exchange strategist in New York at Credit Agricole SA, said in a phone interview. “The Bank of Japan has been very aggressive about its monetary policy, and as long as inflation in Japan is at negative rates, their stance is going to continue to be justified. There’s definitely more scope for aggressive monetary policy.”
Japan’s currency fell 1% to 99.14 per dollar at 8:59 a.m. New York time after declining to 99.36. The currency slid to 99.95 on April 11, the weakest level since April 2009. The yen dropped 1.2% to 129.66 per euro. The dollar dropped 0.2% to $1.3078 per euro.
The South Korean won gained versus all 16 of its most- traded counterparts as an advance in Asian and European stocks fueled demand for greater returns. The currency climbed 1.4% to 8.87 yen after appreciating to 8.891, the strongest since Oct. 2, 2008. The won gained 0.7% to close at 1,116.30 per dollar in Seoul.
South Korea’s currency has rallied from an eight-month low versus the dollar set last week as the Communist North refrained from conducting a nuclear test or a missile launch.
New Zealand’s dollar appreciated against most major counterparts as a Chinese government economist said the nation’s economy may rebound in the second and third quarters of the year. China is the South Pacific nation’s biggest trading partner. The so-called kiwi rose 0.5% to 84.51 U.S. cents after earlier increasing as much as 1%.
“We’re still seeing strong evidence of high demand for high yield, which underpins the Aussie dollar and New Zealand dollar,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Singapore.
New Zealand’s dollar has strengthened 6.4% in the past six months, the best performer of the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The Aussie rose 2.2% and the yen slid 20%.
Japan explained its easing is for price stability, Aso told reporters in Washington. Central bank Governor Haruhiko Kuroda earlier said nations understand Japan’s stance, indicating that he expects no censure.
“The comments from Finance Minister Aso that the plans are seen as unopposed clearly was a trigger point” for selling the yen, said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “A moderate weakening is still on the cards. It looks like we’re going to grind toward 100” yen per dollar, he said.
The G-20 will affirm a commitment to avoid competitive devaluation without singling out any nation, according to a draft statement seen by a Bloomberg BNA reporter.
“This G-20 meeting is more of a dud than usual and it’s not going to stand in the way of a lower yen,” said Todd Elmer, a foreign-exchange strategist at Citigroup Inc. in Singapore. There had been expectations “we could see some stronger international opposition to yen weakening, but this really puts those concerns to rest.”
There’s an 85% probability the yen will weaken to 100 per dollar in the next month, according to options data compiled by Bloomberg.
Options traders are the most bullish on the dollar against its Japanese counterpart in almost two months.
The premium for three-month options granting the right to buy the greenback versus the Japanese currency relative to those allowing for sales was as much 0.94 percentage point today, the most since Feb. 18, according to 25-delta risk reversals.
“From a tactical basis we can understand being dollar bullish at the moment,” David Bloom, global head of currency strategy at HSBC Holdings Plc in London, said in an interview on Bloomberg Television’s “On the Move” with Francine Lacqua and David Tweed. Still, the BOJ measures are not going to work and the dollar “is going to slide back again. At the moment I’m considered the lunatic fringe,” he said.