The yen and euro fell on Friday amid increasing expectations that leading central banks will take steps to offset further deflationary pressures.
The euro fell to US$1.0797 and the yen slipped to ¥118.76 per US dollar and ¥128.23 per euro.
The moves came a day after the European Central Bank (ECB) hinted strongly that it could add new stimulus in March, and ahead of meetings by the US Federal Reserve and Bank of Japan (BOJ) next week in which deflation and global market turbulence will be key issues on the table.
Photo: Reuters
Pressing down on the yen while giving a strong boost to Japanese stocks was a report in the Nikkei business daily on Friday, saying that the BOJ is considering whether to add stimulus to counter the risks of slumping oil prices and a stronger yen.
“The Fed and BOJ meetings will probably be positive ingredients for sentiment,” Sumitomo Mitsui Trust Bank market strategist Ayako Sera said.
However, she doubted the BOJ would add to its stimulus at this meeting.
Bank of Japan Governor Haruhiko Kuroda “isn’t likely to announce fresh monetary easing or other bazooka-like steps,” she said.
After last month’s historic US rate hike, the first in more than nine years, the Fed is also not likely to take action.
However, it it could, in its policy statement, show how cautious it will be about future hikes given the low-inflation environment.
“It will be difficult for Federal Reserve officials to keep a brave face,” Kathy Lien of BK Asset Management said. “We would be surprised if the [Fed policy] statement did not contain a tinge of concern.”
With the ECB and Bank of England both worried about inflation and market swings, she added: “It is hard to believe that US policymakers haven’t been unnerved by the volatility in equities and commodities.”
The US dollar fell against the New Taiwan dollar on Friday, shedding NT$0.133 to close at NT$33.705, down from NT$33.742 on Friday last week, as traders reacted to the strength of other regional currencies and bought into the local currency throughout the session, dealers said.
The greenback’s losses also reflected foreign institutional buying in the stock market, which raised demand for the NT dollar and put pressure on the US currency, they said.
Though Taiwan’s central bank intervened to prop up the US currency, it was not enough to prevent the greenback from ending in negative territory against the Taiwan dollar for the first time in seven sessions, dealers said.
The US dollar opened lower against the NT dollar as traders pocketed gains built in the greenback a session earlier, and selling continued as other regional currencies, in particular the South Korean won, gained ground, dealers said.
The won, which the Taiwan dollar tracks closely, moved higher on hopes that the ECB will pump more funds into the market to boost the eurozone economy, dealers said.
Traders in foreign exchange markets throughout Asia rushed to pick up regional currencies, including the NT dollar, soon after trading began, they said.
A Bloomberg gauge of emerging market currencies climbed 1 percent to wipe out this week’s losses. The index is still trading near a record low.
The ruble led the advance, climbing 5.9 percent to 78.024 per US dollar after reaching an all-time low of 85.999 on Friday.
Jorge Mariscal, the emerging markets chief investment officer at UBS Wealth Management, which oversees US$1 trillion, on Thursday predicted that the Russian currency would strengthen to 73 per dollar in the next three months.
The ringgit rallied by the most since October last year, while the South Korean won jumped more than 1.1 percent. Brazil’s real climbed for the first time in four days.
The offshore yuan completed a second weekly advance after Chinese authorities stepped up their defense of the currency amid capital outflows and a slowing economy.
Malaysia’s 10-year government bond yield dropped to a six-month low as Bank Negara lowered the amount of cash banks must set aside as reserves and opted to keep the benchmark overnight policy rate unchanged to avoid undermining the ringgit.
The British rose 0.8 percent to US$1.4336 as of 4:14pm London time, the biggest increase since Dec. 9. It touched US$1.408 on Thursday, the lowest since March 2009.
The pound gained 1.2 percent to £0.7554 per euro, climbing for a third day.
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