Yen drops after Abe adviser says BOJ can do more

The yen weakened as stocks advanced after an adviser to Japan’s Prime Minister Shinzo Abe said the nation’s central bank can add to its unprecedented stimulus if necessary to support an economic revival.

Japan’s currency weakened against almost all of its 16 major peers as demand for the safest assets waned. South Africa’s rand tumbled to a four-year low versus the dollar after data showed the economy slowed more than analysts estimated in the first quarter. The U.S. currency remained higher against the yen and was little changed against the euro after a private report showed U.S. home prices rose in the 12 months through March by the most in seven years.

“You have a market that’s still biased to sell yen,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in a telephone interview. “Even though we’ve seen profit-taking, there’s still a lot of interest to buy dollar-yen on dips, especially for players that might’ve missed the initial move above 100.”

The yen depreciated 1.1% to 102.07 per dollar at 9:09 a.m. New York time. It reached 103.74 on May 22, the weakest level since October 2008. The Japanese currency slid 1.1% to 131.98 per euro. The dollar was little changed at $1.2930 per euro. Markets in the U.S. and U.K. were closed yesterday for public holidays.

The MSCI Asia Pacific Index rose 0.3% and the Stoxx Europe 600 Index of shares advanced 1.32%.

The yen slid for a seventh-straight month versus the dollar in April after the Bank of Japan pledged to double bond buying in an attempt to secure 2% inflation and drag the world’s third-biggest economy out of 15 years of deflation.

‘Ease Further’

While board member Ryuzo Miyao said in Tokyo today that the central bank has taken all necessary steps for now, Governor Haruhiko Kuroda “should continue to trust in his judgment and ease further” if needed, said Koichi Hamada, the retired Yale University professor advising Abe. The policy is working “as well or better than expected,” Hamada said.

The BOJ estimated that deposits it holds in custody for financial companies will rise to a record 72.4 trillion yen today. The current-account balance is a part of the monetary base, which the central bank plans to double in two years as it buys more than 7 trillion yen of government bonds every month.

“The underlying trend still remains for a weaker yen,” said Lee Hardman, a currency strategist at Bank of Tokyo- Mitsubishi UFJ Ltd. in London. “Investors will continue to become more convinced that Abe’s policies will work. The Japanese equity market has stabilized.”

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