The yen fell to the lowest level in almost three weeks against the dollar on speculation Bank of Japan Governor Haruhiko Kuroda will reiterate the case for monetary easing at an annual Federal Reserve’s conference.
The euro headed for a second weekly gain versus the yen as European Central Bank Governing Council member Ewald Nowotny said good economic news removed the need for further interest- rate cuts. The dollar was poised for a weekly advance against most major peers as data backed the case for the Fed to reduce stimulus. Emerging-market nations boosted efforts to halt currency losses, with Brazil announcing an intervention program and Indonesia planning to reduce its current-account deficit.
Kuroda is “going to continue that language just to make sure that markets are well aware that the Bank of Japan still has ammunition left,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit, said in a telephone interview. “That’s something that could certainly be contributing to the weakness in the yen that we’ve seen recently.”
The yen declined 0.3% to 99.03 per dollar at 9:56 a.m. in New York and touched the weakest level since Aug. 5. Japan’s currency dropped 0.2% to 132.16 per euro, having fallen 1.7% this week. The euro was little changed at $1.3349.
Brazil’s currency gained after the central bank stepped up efforts to arrest the world’s second-worst currency decline, announcing a $60 billion intervention program involving currency swaps and loans. The real rose 1.4% to 2.4018 per U.S. dollar.
Indonesia’s rupiah rebounded from a four-year low after the central bank announced measures to boost foreign-currency supply. The rupiah gained 0.4% to 10,780 per dollar.
India’s rupee jumped 2% to 63.3300 per dollar to pare a weekly drop to 2.7% as Asia’s No. 3 economy faces risks from a current-account deficit that’s not sustainable, slowing growth, a budget gap and rising bad loans at banks, the Reserve Bank of India said.
South Africa’s currency gained, paring a second straight weekly drop on signals from emerging-market nations that they may support markets. The rand advanced 0.4% to 10.2426 per dollar.
Kuroda will take part in a panel discussion tomorrow at the three-day Jackson Hole, Wyoming, conference. The BOJ doubled its monthly bond purchases to more than 7 trillion yen in April to stoke 2% inflation in two years.
“Markets will likely focus on any views Kuroda holds on the implementation on fiscal changes and how that could affect his outlook for monetary policy,” said Geoffrey Yu, senior foreign-exchange strategist at UBS AG in London. “There may be pressure on him to act to offset any growth drags arising from greater fiscal restraint. We expect the market to look to get back into long dollar versus yen positions before the Fed’s September meeting.”
Kuroda backed a planned sale-tax increase aimed at reducing the nation’s debt. If a higher levy or changing conditions overseas heightened the risk of a slowdown, the central bank “won’t hesitate” to add to its unprecedented easing policy, Mainichi newspaper reported on Aug. 21, citing an interview.
The yen has tumbled 20% in the past 12 months, the worst performer among the 10 developed-market currencies tracked by the Bloomberg Correlation Weighted Indexes. The dollar strengthened 3.3% and the euro gained 11%.
The euro was poised for a weekly gain versus all of its 16 major counterparts after Nowotny, who heads Austria’s central bank, said in an interview with Bloomberg Television in Jackson Hole, yesterday that he did “not see many arguments now for a rate cut.”
At the same time, he ruled out an early monetary tightening, saying “the most recent developments will have no immediate effects on the policy of the European Central Bank.”
With the euro area emerging from its longest-ever recession last quarter, ECB officials led by President Mario Draghi are seeking to damp speculation they will shift to tighter policy prematurely. Draghi has pledged to keep the ECB’s benchmark rate at a record low of 0.5% for an “extended period.”
“Nowotny’s remarks spurred euro buying,” said Yuji Saito, the director of foreign-exchange at Credit Agricole Corporate & Investment Bank in Tokyo. “The euro region’s economy is improving.”
The dollar gained for a third day against the yen after minutes from the Federal Open Market Committee’s July 30-31 gathering, released this week, showed most policy makers backed the case for a reduction in stimulus.
The FOMC will reduce its monthly purchases of $85 billion in bonds at its next meeting on Sept. 17-18, according to 65% of economists in an Aug. 9-13 Bloomberg survey. The median estimate is a cut to $75 billion each month.
Ben S. Bernanke, who has given the introductory speech every year since becoming Fed chairman in 2006, has passed up on the annual monetary conference underway in Jackson Hole.
The Bloomberg U.S. Dollar Index, which tracks the currency against a basket of its 10 major counterparts, rose 0.1% to 1,029.52 after climbing to 1,031.37 yesterday, the highest level since Aug. 2.