Yen Falls on Speculation BOJ Will Decide to Weaken Currency

ppteam

The yen dropped versus all its major counterparts on speculation the Bank of Japan will act to curb currency gains that are imperiling the nation’s export-led economic recovery.

The Japanese currency slid to one-week lows versus the dollar and euro after the Bank of Japan said in an e-mailed notice it will hold an emergency policy meeting at 9 a.m. Tokyo time. Prime Minister Naoto Kan, who is compiling his own stimulus measures to spur growth, said on Aug. 27 he expects the bank to implement policy “swiftly.” The Australian dollar rose as gains in stocks and commodities boosted demand for currencies linked to growth.

“The BOJ needs to reverse its unwillingness to enact additional credit easing and make it clear that it is fighting against deflation and a strong yen,” said Daisaku Ueno, Tokyo- based president at Gaitame.com Research Institute Ltd., a unit of Japan’s largest currency margin trading company. “The BOJ may need to offer surprises, such as increases in outright purchases of government debt, to bring a definite end to the yen’s advance.”

The yen dropped to 85.70 per dollar as of 9:49 a.m. in Tokyo from 85.22 yen in New York on Aug. 27 after reaching 85.75, the weakest since Aug. 20. The Japanese currency fell to 109.22 per euro from 108.72 after earlier touching 109.30, the least since Aug. 20. The dollar was at $1.2745 per euro from $1.2763 last week.

Shirakawa Returns

BOJ Governor Masaaki Shirakawa returned to Tokyo yesterday from a Federal Reserve symposium in Jackson Hole, Wyoming, a day ahead of his original schedule. Japanese Prime Minister Naoto Kan will meet Shirakawa after the central bank’s extraordinary meeting today, CNBC reported, citing Jiji news service.

Pressure on the bank has been mounting since it kept its key overnight lending rate at 0.1 percent and refrained from expanding credit measures at an Aug. 9-10 meeting. The yen went on to reach 83.60 per dollar last week, the strongest since June 1995.

The Nikkei 225 Stock Average fell 5.9 percent from the BOJ’s last meeting through last week amid signs that global growth is faltering and on concern the yen’s advance will damp the Japanese economy, which expanded last quarter at its slowest pace this year.

The yen tends to gain in times of economic or financial turmoil as Japan’s current-account surplus means it doesn’t need foreign capital. A stronger domestic currency hurts the overseas competitiveness of Japanese exporters and reduces the value of earnings from other countries.

Policy Combination

The Nikkei 225 surged 2.5 percent today, while yields on benchmark 10-year Japanese government bonds rose 10.5 basis points.

“Perhaps it’s a combination that the BOJ boosts JGB purchases at the same time that the government loosens the fiscal taps again, with the aim of the combination of them to support confidence and weaken the yen.” Said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “On the day, we’ll aim for the highs from about two weeks ago, so the 86.40 area. That would be the first target.”

Central banks intervene in foreign-exchange markets by buying or selling currencies to influence exchange rates.

Japan last intervened in March 2004, when the yen was at about 109 per dollar. The Bank of Japan sold 14.8 trillion yen ($173 billion) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003. The currency ended the year at 102.63 to the dollar. Japan last bought the currency in 1998.

Risk Sentiment

The Australian and New Zealand dollars advanced as Asian stocks rose.

“While additional easing in Japan will bode well for stocks, we also need to assess if the policy speculation-induced bull run can be sustained and how it will affect risk sentiment as whole,” said Soichiro Mori , chief strategist in Tokyo at FXOnline Japan Co., a margin-trading company.

Australia’s currency rose to 77.27 yen from 76.62 yen in New York on Aug. 27. It climbed 0.3 percent to 90.16 U.S. cents. The New Zealand dollar advanced to 61.01 yen from 60.56 yen. It gained 0.1 percent to 71.17 U.S. cents.

The MSCI Asia Pacific Index of regional shares gained 1.1 percent. Crude oil for October delivery rose as much as 0.6 percent, to $75.58 a barrel, in electronic trading on the New York Mercantile Exchange.

Diffusion

Speculate有阵子了，JCB啥时候动手啊。

ppteam

LOL

is this the long overdue 鸡血？

ppteam

talk about double standard.

When Jap and Swiss CB deals, they are called 'intervention'.
As for China, that's called 'manipulation'.

Diffusion

锵锵三人行 之 打鸡血篇

Diffusion

talk about double standard.

When Jap and Swiss CB deals, they are called 'intervention'.
As fo ...
ppteam 发表于 2010-8-29 22:15

   

ppteam

I remember some guys come up with a 'strategy' on how to trade currency with central bank's intervention. LOL

Diffusion

I remember some guys come up with a 'strategy' on how to trade currency with central bank's interven ...
ppteam 发表于 2010-8-29 22:21