BLBG: Yen Declines on Report Bank of Japan Will Step Up Credit Easing
By Yasuhiko Seki and Paul Dobson
March 5 (Bloomberg) -- The yen weakened for a second day against the dollar as stocks rose and investors speculated the Bank of Japan will step up credit-easing measures as the U.S. economy strengthens.
Japan’s currency declined against the euro after costs to borrow in yen fell in London and Nikkei English News said the central bank is likely to discuss more monetary-easing measures at its next meeting. The South Korean won led Asian currencies higher amid speculation a U.S. employment report today will show less job losses than economists forecast.
“The big battle has been this standoff between the government and the Bank of Japan, and it looks as if the BOJ has winked,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “People will undoubtedly think it will make the yen attractive as a funding currency.”
The yen weakened to 89.24 per dollar as of 10 a.m. in London from 89.02 in New York yesterday, down 0.4 percent this week. Japan’s currency depreciated to 121.42 versus the euro, from 120.91. The dollar traded at $1.3600 per euro, from $1.3581.
The MSCI Asia Pacific Index of shares advanced 0.8 percent, headed for a second weekly gain.
Japan’s currency headed for its third weekly decline in four weeks against the dollar as lawmakers ratchet up pressure on the nation’s central bank to tackle the prospect of deflation. It’s still stronger against all 16 of its most-traded peers this year after a weakening of the global economic recovery drove investors to seek the safest assets.
BOJ Measures
The Bank of Japan may discuss ways to lower short-term rates at its two-day meeting starting March 16, Nikkei said, without citing any sources. A decision on specific measures is likely to take place in April, when two board meetings are scheduled, the newspaper said.
“An additional response from the BOJ is effective in guiding yen-based term rates lower, thereby eliminating upward pressure on the yen,” said Yasuhiro Onakado, chief economist in Tokyo at Daiwa SB Investments Ltd., which has the equivalent of $38.1 billion under management. “Having said this, chances of such moves look to be slim.”
Japan’s central bank unveiled a 10 trillion yen ($112.1 billion) lending facility for commercial banks in December after the yen surged to a 14-year high of 84.83 per dollar the previous month and government ministers urged the central bank to do more to combat deflation.
The rate banks charge each other to borrow yen for three months fell below the dollar rate for the first time since August yesterday, boosting its appeal as a funding currency.
Asian Currencies
The South Korean currency rose for a sixth day versus the dollar and the Taiwanese dollar strengthened before the U.S. Labor Department reports its non-farm payrolls report today.
U.S. companies cut 68,000 jobs in February, after trimming 20,000 positions the month before, according to a Bloomberg News survey. Claims for U.S. jobless benefits fell to 469,000 last week, the Labor Department said yesterday. That compared with economist estimates for 470,000.
“Pessimism about the U.S. employment report has receded following better-than-expected initial jobless claims,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. “Equities in Asia are also gaining. All of this is positive for risk appetite.”
The Taiwan dollar gained 0.1 percent to NT$31.918 and the won climbed 0.4 percent to 1,140.3 per dollar.
New Zealand Dollar
New Zealand’s dollar has been the second-worst performer among major currencies this week on speculation the central bank will keep borrowing costs at a record low at its next policy review on March 11.
The South Pacific economy lost some momentum as retail spending and the property market slowed in the first months of 2010, the Treasury Department said March 1. Reserve Bank of New Zealand Governor Alan Bollard last month said he is looking for evidence the economic recovery has become self sustaining before he starts raising interest rates from record lows.
“Bollard will maintain his tone and give a fairly mixed report card on the economy and that will again lend itself to selling against things like the Aussie,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney.
New Zealand’s dollar has slid 1.3 percent this week to 68.95 U.S. cents. It declined to 68.52 cents yesterday, the lowest level since Feb. 25.
The U.S. dollar may weaken to 84.83 yen, a 15-year low reached in November, according to Mizuho Corporate Bank Ltd., citing trading patterns.
The greenback’s drop below the so-called cloud on an ichimoku chart signals the currency is in a downtrend, said Hiroyuki Tanaka, chief technical analyst at Mizuho Corporate Bank in Tokyo. Should the dollar fall “clearly” below 87.50, it may slide to 84.83, a low reached on Nov. 27 that was weakest since July 1995, he said.
“The U.S. currency is poised to test the S-point between 87.30 yen and about 87.50 yen,” Tanaka said yesterday, referring to an area where the greenback’s decline may stop.
To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net
