| Bloomberg | - |
The
yen tumbled to its weakest level in almost seven years after the Bank
of Japan unexpectedly boosted monetary stimulus, underscoring the
widening gulf in monetary policy with the Federal Reserve.
Yen Slips to Seven-Year Low as Central Banks Diverge
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The yen tumbled to its weakest level
in almost seven years after the Bank of Japan unexpectedly
boosted monetary stimulus, underscoring the widening gulf in
monetary policy with the Federal Reserve.
The Japanese currency fell versus the dollar for a fourth month, the longest skid since December, amid speculation reforms to the $1.1 trillion state retirement fund will encourage flows out of the yen. The dollar climbed to a more than four-year high after the Fed ended asset purchases that have supported the economy since 2008. A government report next week is forecast to show that the U.S. added 235,000 jobs in October. Russia’s ruble extended a yearlong slump.
“We’ve finally seen the policy-divergence trade come home to roost,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. “The one-two punch in terms of policy, that really runs the risk of seeing this downtrend for the yen play out further in the coming weeks.”
The yen touched 112.48 per dollar, the lowest since December 2007, before ending the month down 2.4 percent at 112.32. The dollar rose for a fourth month against the euro, the longest rally since June 2010, gaining 0.8 percent to $1.2525. It touched $1.2486, the strongest since August 2012. The euro advanced 1.6 percent in October to 140.68 yen.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose 0.9 percent to close the month at 1,080.84, the highest since June 2010. Its fourth consecutive monthly gain is the longest streak since March 2013.
The ruble declined 7.9 percent versus the dollar in October, pushing its year-to-date slump to 24 percent. The Polish zloty and Czech koruna were the next biggest losers last month, dropping 1.9 percent each.
Chile’s peso led gainers, adding 3.5 percent, followed by the Turkish lira at 2.5 percent and South Africa’s rand at 2.2 percent.
Brazil’s real slid 1.3 percent last month, after plunging as much as 3.2 percent yesterday as the budget deficit widened to a surprise record in September to add to the challenges of newly re-elected President Dilma Rousseff.
The central bank highlighted “solid” job gains and a falling jobless rate in its statement Oct. 29, while pledging to maintain borrowing costs at a record low for a “considerable time.” A report Nov. 7 is forecast to show the unemployment rate remained at 5.9 percent, the lowest level since July 2008.
“The Fed became more hawkish than expected this week and the sense was maybe the BOJ will remain relatively neutral,” Neil Jones, the head of hedge-fund sales at Mizuho Bank Ltd. in London, said by phone yesterday. “This has accentuated the sovereign divergence as a major force in markets. The price action tells you it’s a major surprise.”
Hedge funds and other large speculators boosted bets on the dollar versus eight of its major peers to the most on record this week. The difference in the number of wagers on a gain compared with those on a drop -- net longs -- was 345,633 as of Oct. 28, according to data from the Washington-based Commodity Futures Trading Commission.
Officials also unveiled reforms to the Government Pension Investment Fund that increased allocations to stocks and overseas assets by more than expected. Japan’s public retirement-savings manager will put half its holdings in local and foreign stocks and reduce domestic bonds to 35 percent of assets from 60 percent.
Nomura Holdings Inc., Japan’s largest brokerage, revised its forecast for the yen in response. The lender is now targeting 115 yen per dollar by the end of the year, from 112 yen prior to the announcements, Jens Nordvig, a managing director of currency research, wrote in a note to clients yesterday.
“We don’t think the move is over,” he said by phone from New York. “We’re hoping to move to 115. I think that’s very possible.”
Sweden’s central bank joined the in the easing, unexpectedly cutting its main rate to zero this week. The krona fell 2.4 percent in October, its fourth monthly decline.
The yen dropped 3.5 percent in the past three months, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar was the best performer, adding 6.5 percent, while the euro dipped 1.1 percent.
To contact the reporters on this story: Rachel Evans in New York at revans43@bloomberg.net; Andrea Wong in New York at awong268@bloomberg.net
To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net Kenneth Pringle, Greg Storey
end quote from:The Japanese currency fell versus the dollar for a fourth month, the longest skid since December, amid speculation reforms to the $1.1 trillion state retirement fund will encourage flows out of the yen. The dollar climbed to a more than four-year high after the Fed ended asset purchases that have supported the economy since 2008. A government report next week is forecast to show that the U.S. added 235,000 jobs in October. Russia’s ruble extended a yearlong slump.
“We’ve finally seen the policy-divergence trade come home to roost,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. “The one-two punch in terms of policy, that really runs the risk of seeing this downtrend for the yen play out further in the coming weeks.”
The yen touched 112.48 per dollar, the lowest since December 2007, before ending the month down 2.4 percent at 112.32. The dollar rose for a fourth month against the euro, the longest rally since June 2010, gaining 0.8 percent to $1.2525. It touched $1.2486, the strongest since August 2012. The euro advanced 1.6 percent in October to 140.68 yen.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose 0.9 percent to close the month at 1,080.84, the highest since June 2010. Its fourth consecutive monthly gain is the longest streak since March 2013.
Winners, Losers
Russia’s ruble fell the most among 24 emerging-market currencies versus the greenback last month after the country failed to adopt a more aggressive foreign-exchange policy. The central bank raised rates yesterday, rather than altering the fixed trading-band policy that allows traders to profit from keeping short positions and betting on further depreciation.The ruble declined 7.9 percent versus the dollar in October, pushing its year-to-date slump to 24 percent. The Polish zloty and Czech koruna were the next biggest losers last month, dropping 1.9 percent each.
Chile’s peso led gainers, adding 3.5 percent, followed by the Turkish lira at 2.5 percent and South Africa’s rand at 2.2 percent.
Brazil’s real slid 1.3 percent last month, after plunging as much as 3.2 percent yesterday as the budget deficit widened to a surprise record in September to add to the challenges of newly re-elected President Dilma Rousseff.
‘Hawkish’ Fed
The dollar advanced against most of its 31 major peers in October as the Fed finished a program of bond buying on schedule, taking the U.S. closer to its first interest-rate increase in eight years.The central bank highlighted “solid” job gains and a falling jobless rate in its statement Oct. 29, while pledging to maintain borrowing costs at a record low for a “considerable time.” A report Nov. 7 is forecast to show the unemployment rate remained at 5.9 percent, the lowest level since July 2008.
“The Fed became more hawkish than expected this week and the sense was maybe the BOJ will remain relatively neutral,” Neil Jones, the head of hedge-fund sales at Mizuho Bank Ltd. in London, said by phone yesterday. “This has accentuated the sovereign divergence as a major force in markets. The price action tells you it’s a major surprise.”
Hedge funds and other large speculators boosted bets on the dollar versus eight of its major peers to the most on record this week. The difference in the number of wagers on a gain compared with those on a drop -- net longs -- was 345,633 as of Oct. 28, according to data from the Washington-based Commodity Futures Trading Commission.
Revised Forecast
The yen plunged after the BOJ said it plans to expand the monetary base by 80 trillion yen ($713 billion) a year, up from a previous 60 trillion to 70 trillion yen. Only three of 32 economists surveyed by Bloomberg predicted a change.Officials also unveiled reforms to the Government Pension Investment Fund that increased allocations to stocks and overseas assets by more than expected. Japan’s public retirement-savings manager will put half its holdings in local and foreign stocks and reduce domestic bonds to 35 percent of assets from 60 percent.
Nomura Holdings Inc., Japan’s largest brokerage, revised its forecast for the yen in response. The lender is now targeting 115 yen per dollar by the end of the year, from 112 yen prior to the announcements, Jens Nordvig, a managing director of currency research, wrote in a note to clients yesterday.
“We don’t think the move is over,” he said by phone from New York. “We’re hoping to move to 115. I think that’s very possible.”
Euro, Krona
The euro fell as the European Central Bank stepped up its stimulus efforts, buying covered bonds last week and saying it will expand into asset-backed securities in November. It also cut interest rates to record lows.Sweden’s central bank joined the in the easing, unexpectedly cutting its main rate to zero this week. The krona fell 2.4 percent in October, its fourth monthly decline.
The yen dropped 3.5 percent in the past three months, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar was the best performer, adding 6.5 percent, while the euro dipped 1.1 percent.
To contact the reporters on this story: Rachel Evans in New York at revans43@bloomberg.net; Andrea Wong in New York at awong268@bloomberg.net
To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net Kenneth Pringle, Greg Storey
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