Sept. 28 (Bloomberg) -- The yen rose against all of its 16 most-traded counterparts tracked by Bloomberg and touched the highest level in eight months against the dollar on speculation Japan’s new government will allow its currency to appreciate.
The dollar fell below 89 yen for the first time since February after Finance Minister Hirohisa Fujii said the Japanese currency’s moves aren’t excessive. The greenback pared losses after Fujii said people misinterpreted his comments as an endorsement for a strong currency.
“The Japanese finance minister talked down the risk of currency intervention, and that is a red flag to the bulls,” said Paul Robson, a currency strategist at Royal Bank of Scotland Group Plc in London. “I expect the yen to move stronger against the dollar.”
The yen advanced 0.4 percent to 89.27 per dollar at 10:21 a.m. in New York, from 89.64 on Sept. 25. It earlier touched 88.24, the strongest level since Jan. 23. The yen appreciated 0.3 percent to 131.31 per euro, from 131.70, after reaching 129.83, the strongest since July 14. The dollar climbed 0.3 percent to $1.4650 per euro, from $1.4689.
The pound dropped for a fourth day against the dollar, falling as much as 1.1 percent to $1.5771, the lowest level since May 22. Sterling dropped 5.5 percent since Aug. 6, when the Bank of England expanded its program of asset purchases designed to keep borrowing costs low by 50 billion pounds ($79 billion) to 175 billion pounds.
The yen strengthened 1.9 versus the dollar last week after Fujii said at the Group of 20 meeting in Pittsburgh on Sept. 24 that he has been questioning the idea of “easy intervention.”
Fujii’s Stance
Fujii said on Sept. 16 he doesn’t support a “weak yen,” fueling speculation the government won’t act to curb the currency’s 19 percent appreciation versus the dollar in the past year. Central banks intervene in foreign-exchange markets by selling and buying currencies.
Speaking today at a forum co-hosted by Bloomberg, Fujii said he “never said I will leave the yen to strengthen” and that he didn’t necessarily accept gains in the currency. Fujii’s Democratic Party of Japan swept to power in elections on a platform of boosting public consumption.
The yen will be among the best-performing currencies in the fourth quarter as the dollar replaces it as the funding asset of choice and strengthens as stock markets rise, according to JPMorgan Chase & Co.
Japan’s currency may appreciate to 85 per dollar by year- end, John Normand, global head of foreign-exchange strategy in London at JPMorgan, said in an interview.
JPMorgan on Yen
“The yen is no longer the best funding currency globally,” Normand said. “The yen no longer weakens reflexively when growth accelerates and equities rally.”
The London interbank offered rate, or Libor, for three- month yen loans stayed at almost a 16-year high relative to comparable-maturity dollar Libor, with the spread at 0.06 percentage point.
The Japanese currency’s level of about 90 per dollar is “painful,” Toyota Motor Corp. Executive Vice President Yukitoshi Funo said on Sept. 25.
The Bank of Japan’s Tankan survey will probably show this week that the economic recovery is too weak to persuade companies to invest. Large firms plan to cut capital spending by 9 percent this year, little changed from estimates made three months ago as the nation was emerging from a recession, economists predict the Oct. 1 report will show.
“I don’t think a strong yen is the trend,” said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York. “The Japanese economy is not in a good shape. The yen strength will be short-lived.”
Profit Repatriation
Japan’s currency also gained versus the dollar today on expectation exporters are taking advantage of an April 1 rule change that waives taxes on repatriated profits. Under previous laws, companies had to pay a combined 40 percent tax on overseas earnings. The first half of Japan’s fiscal year ends Sept. 30.
“Japanese firms are continuing to bring home profits,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo.
The yen climbed to 87.13 per dollar on Jan. 21, the strongest since July 1995. The median forecast among securities companies is for the currency to trade at 96 per dollar at year- end and 98 at the end of the first quarter of 2010.
The Norwegian krone, Swedish krona and New Zealand dollar gained about 10 percent against the U.S. dollar since June 30, making them the best performers among the 16 major currencies. Rising oil prices helped Norway. New Zealand benefited from accelerating growth in Australia, its biggest market. The international bailout of Latvia staved off defaults on Swedish bank loans.
The krone dropped 0.3 percent to 5.8205 per dollar today, while the krona slid 0.3 percent to 6.9713. The New Zealand dollar fell 0.6 percent to 71.51 U.S. cents.
The dollar fell below 89 yen for the first time since February after Finance Minister Hirohisa Fujii said the Japanese currency’s moves aren’t excessive. The greenback pared losses after Fujii said people misinterpreted his comments as an endorsement for a strong currency.
“The Japanese finance minister talked down the risk of currency intervention, and that is a red flag to the bulls,” said Paul Robson, a currency strategist at Royal Bank of Scotland Group Plc in London. “I expect the yen to move stronger against the dollar.”
The yen advanced 0.4 percent to 89.27 per dollar at 10:21 a.m. in New York, from 89.64 on Sept. 25. It earlier touched 88.24, the strongest level since Jan. 23. The yen appreciated 0.3 percent to 131.31 per euro, from 131.70, after reaching 129.83, the strongest since July 14. The dollar climbed 0.3 percent to $1.4650 per euro, from $1.4689.
The pound dropped for a fourth day against the dollar, falling as much as 1.1 percent to $1.5771, the lowest level since May 22. Sterling dropped 5.5 percent since Aug. 6, when the Bank of England expanded its program of asset purchases designed to keep borrowing costs low by 50 billion pounds ($79 billion) to 175 billion pounds.
The yen strengthened 1.9 versus the dollar last week after Fujii said at the Group of 20 meeting in Pittsburgh on Sept. 24 that he has been questioning the idea of “easy intervention.”
Fujii’s Stance
Fujii said on Sept. 16 he doesn’t support a “weak yen,” fueling speculation the government won’t act to curb the currency’s 19 percent appreciation versus the dollar in the past year. Central banks intervene in foreign-exchange markets by selling and buying currencies.
Speaking today at a forum co-hosted by Bloomberg, Fujii said he “never said I will leave the yen to strengthen” and that he didn’t necessarily accept gains in the currency. Fujii’s Democratic Party of Japan swept to power in elections on a platform of boosting public consumption.
The yen will be among the best-performing currencies in the fourth quarter as the dollar replaces it as the funding asset of choice and strengthens as stock markets rise, according to JPMorgan Chase & Co.
Japan’s currency may appreciate to 85 per dollar by year- end, John Normand, global head of foreign-exchange strategy in London at JPMorgan, said in an interview.
JPMorgan on Yen
“The yen is no longer the best funding currency globally,” Normand said. “The yen no longer weakens reflexively when growth accelerates and equities rally.”
The London interbank offered rate, or Libor, for three- month yen loans stayed at almost a 16-year high relative to comparable-maturity dollar Libor, with the spread at 0.06 percentage point.
The Japanese currency’s level of about 90 per dollar is “painful,” Toyota Motor Corp. Executive Vice President Yukitoshi Funo said on Sept. 25.
The Bank of Japan’s Tankan survey will probably show this week that the economic recovery is too weak to persuade companies to invest. Large firms plan to cut capital spending by 9 percent this year, little changed from estimates made three months ago as the nation was emerging from a recession, economists predict the Oct. 1 report will show.
“I don’t think a strong yen is the trend,” said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York. “The Japanese economy is not in a good shape. The yen strength will be short-lived.”
Profit Repatriation
Japan’s currency also gained versus the dollar today on expectation exporters are taking advantage of an April 1 rule change that waives taxes on repatriated profits. Under previous laws, companies had to pay a combined 40 percent tax on overseas earnings. The first half of Japan’s fiscal year ends Sept. 30.
“Japanese firms are continuing to bring home profits,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo.
The yen climbed to 87.13 per dollar on Jan. 21, the strongest since July 1995. The median forecast among securities companies is for the currency to trade at 96 per dollar at year- end and 98 at the end of the first quarter of 2010.
The Norwegian krone, Swedish krona and New Zealand dollar gained about 10 percent against the U.S. dollar since June 30, making them the best performers among the 16 major currencies. Rising oil prices helped Norway. New Zealand benefited from accelerating growth in Australia, its biggest market. The international bailout of Latvia staved off defaults on Swedish bank loans.
The krone dropped 0.3 percent to 5.8205 per dollar today, while the krona slid 0.3 percent to 6.9713. The New Zealand dollar fell 0.6 percent to 71.51 U.S. cents.
