The yen had its first two-week decline since May amid speculation that further monetary stimulus to boost Japan’s struggling economy is inevitable, whether or not it comes at Friday’s central bank meeting.
Mizuho Bank Ltd and Commerzbank AG say Bank of Japan (BOJ) officials may well refrain from cutting their negative main interest rate or increasing asset purchases at that gathering. Yet speculation is building that currency-depreciating stimulus is on its way, with the government said to be discussing about ￥3 trillion (US$28.3 billion) of supplementary spending for the current fiscal year.
“As fiscal measures might not seem to be ready next week, I do see room to wait somewhat longer with further BOJ easing,” said Esther Reichelt, a Frankfurt-based currency strategist at Commerzbank AG. “If they do not do anything, and not even hint at further easing in the near future, the yen will definitely appreciate.”
The yen, commonly regarded as a haven because of Japan’s current account surplus, has undone the advance that followed the UK’s June 23 decision to leave the EU. Its 13 percent gain against the US dollar this year leaves the Japanese currency close to analysts’ year-end forecasts before the BOJ’s Friday announcement.
The yen weakened 0.3 percent to ￥106.13 per US dollar as of 5pm in New York, leaving it down 1.2 percent on the week. It fell 0.7 percent this week to ￥116.51.
The yen rose on Thursday after BOJ Governor Haruhiko Kuroda dismissed the idea of so-called helicopter money as a way of injecting cash into the economy.
It pared its gains as it emerged that the Kuroda interview with BBC Radio was conducted before last month’s UK referendum. The yen touched ￥107.49 per US dollar on Thursday, the weakest level since June 7.
“The yen should still be a sell in the runup to the BOJ and supplementary budget announcements,” said Neil Jones, head of hedge-fund sales at Mizuho in London. “While there’s a risk of no change in policy on July 29, I still think it’s just a matter of time before there’s further stimulus for Japan.”
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose 0.8 percent this week. The greenback rose 0.5 percent to US$1.0977 per euro.
In Taipei, the US dollar rose against the New Taiwan dollar on Friday, gaining NT$0.010 to close at NT$32.070 as foreign institutional investors moved funds out of the country, dealers said.
The fund outflows came after major Taiwanese listed companies issued relatively high cash dividends the past two days, but further foreign buying in the Taiwanese stock market gave some support to the NT dollar, they said.
It was the third consecutive session in which the US dollar moved higher against the local currency, and the US unit was up 0.25 percent for the week against the NT dollar.
Meanwhile, the pound’s recent resilience may prove short-lived as data showed the first indications that the UK economy might be faltering one month after Britain voted to leave the European Union.
Inflation and labor figures covering the pre-Brexit period, released earlier this week, beat analyst predictions and helped the currency climb from a 31-year low versus the US dollar set on July 6.
That rally ended on Friday after purchasing managers’ index reports, which included the period following the June 23 referendum, suggested the UK’s manufacturing and services industries contracted this month.
The pound fell 0.8 percent this week to US$1.3092 as of 5:09pm in London on Friday, having climbed to as much as US$1.3481 on July 15, the day after the Bank of England’s policy announcement.
Sterling depreciated 0.1 percent to ￡0.8376 per euro, after strengthening 1.9 percent a week earlier.
Additional reporting by staff writer, with CNA
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