Yen Poised for Weekly Loss Against Most Peers on U.S. Data, BOJ

By Monami Yui and Kristine Aquino - Mar 16, 2012 9:29 AM GMT+0700

The yen headed for a weekly drop against most peers as signs of growth in the U.S. economy and prospects for further stimulus by Japan’s central bank prompted investors to seek higher-yielding assets.

The greenback traded 0.9 percent from an 11-month high versus the yen before U.S. data today that may show industrial production increased and consumer sentiment improved. The Australian and New Zealand dollars were set for a weekly gain against the yen after stocks rallied globally yesterday, boosting demand for riskier assets. Most Bank of Japan (8301) board members said easing steps taken last month were “appropriate,” policy meeting minutes released today showed.

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The Japanese currency has fallen 1.2 percent this week, set for a sixth-straight decline. Photographer: Tomohiro Ohsumi/Bloomberg

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March 15 (Bloomberg) -- Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., talks about currency strategy for the yen, dollar and Swiss franc. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)

“I’d have to say the momentum is still firmly for a weaker yen,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. (WBC) “The BOJ’s easing stance definitely seems to have at least contributed to the upswing in dollar- yen.”

The yen was little changed at 83.45 per dollar as of 11:26 a.m. in Tokyo from the close yesterday, when it touched 84.18, the weakest level since April 13. The Japanese currency has fallen 1.2 percent this week, set for a sixth-straight decline. It rose 0.1 percent to 109.19 per euro, set for a 0.9 percent drop since March 9. The dollar traded at $1.3084 per euro from $1.3080 yesterday and $1.3123 on March 9.

Australia’s currency was unchanged at 87.96 yen, set for a weekly advance of 0.9 percent. New Zealand’s kiwi dollar bought 68.60 yen from 68.45 yen yesterday and 67.74 on March 9.

The Standard & Poor’s 500 Index (SPX) of shares rose 0.6 percent yesterday, while the MSCI World Index rallied 0.7 percent. The MSCI Asia Pacific Index remained higher after a three-day gain.

BOJ Easing

The BOJ unexpectedly expanded its asset purchase program by 10 trillion yen ($120 billion) and set an inflation goal of 1 percent at its meeting that concluded on Feb. 14. One board member said the central bank should aim for 2 percent inflation, minutes showed.

The BOJ on March 13 expanded loans designed to boost long- term growth. On the same day, the Federal Reserve raised its outlook for U.S. growth, predicting unemployment “will decline gradually.

The dollar has risen against 15 of its 16 major counterparts this week as signs of strength in the U.S. economy reduced the chance for a third round of bond purchases -- known as quantitative easing or QE3 -- by the Fed to spur growth.

Industrial output at U.S. factories, mines and utilities climbed 0.4 percent in February, according to the median of economists surveyed by Bloomberg News before today’s data release. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to a one-year high of 76 in March, a separate poll showed ahead of the figures due today.

Reduced QE Risks

‘‘We are, for the most part, quite positive on the U.S. dollar in the coming weeks,’’ said Westpac’s Callow. ‘‘People in general are saying QE3 risks have receded and I think that’s fair.”

The dollar has strengthened 1.1 percent in the past month, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-market currencies. The euro rose 0.6 percent, while the yen sank 5.1 percent, the worst performer.

The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, was little changed at 80.282 today. The gauge, which is 57.6 percent weighted to movements in the euro, touched 80.738 yesterday, the strongest since Jan. 18.

The greenback’s 14-day relative strength index against the yen was at 75 today, having held above 70 since March 9. Some traders see RSI levels above 70 as a sign an asset may reverse direction. The euro’s RSI versus the yen was at 69 yesterday.

“The dollar-yen looks to be nearing its peak,” said Minori Uchida, a senior analyst in Tokyo at Bank of Tokyo- Mitsubishi. “The dollar has been too strong and the yen has been too weak, leading to some selling in the pair. I expect the dollar-yen to stay around the 83 level for a while.”

To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net