“For a Bank of Japan board member to advocate restricting the quantitative-easing program to just two years is a concern to the market,” said Alvin Tan, a director of foreign-exchange strategy at Societe Generale SA in London. “Yen strength can continue while we don’t get clarity out of Japan on this. We believe that the Fed’s exit will be tentative and drawn out.”
The yen has slumped 7.5% this year, the worst performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes, as the Bank of Japan embarked upon unprecedented stimulus to spur growth. The euro gained 3.6% and the dollar added 2.4%.
The Dollar Index pared a fourth weekly decline as producer- price index rose 0.5% in May, according to a Labor Department report released today in Washington. The median estimate in a Bloomberg survey of 76 economists projected the index would gain 0.1%.
Fed policy makers next meet on June 18-19 after Chairman Ben S. Bernanke said on May 22 the central bank could reduce its monthly purchases of $45 billion of Treasuries and $40 billion of mortgage-backed securities, known as quantitative easing, if the employment outlook shows sustainable improvement.
“People perceive the idea that the Fed is itching really to remove QE, not really because the data has changed, but because the costs related to QE are seen as too high to bear at this point,” said Alan Ruskin, global head of Group of 10 foreign-exchange strategy at Deutsche Bank in a interview with Tom Keene and Scarlet Fu on Bloomberg Television’s “Surveillance.”
The Dollar Index, which Intercontinental Exchange Inc. uses to monitor the greenback against the currencies of six U.S. trade partners gained 0.1% to 80.791 after falling to 80.50 yesterday, the lowest since Feb. 20.