The yen tumbled to its weakest level in almost seven years after the Bank of Japan (BOJ) unexpectedly boosted monetary stimulus, underscoring the widening gulf in monetary policy with the US Federal Reserve.
The Japanese currency fell versus the US dollar for a fourth month, the longest skid since December last year, amid speculation reforms to the US$1.1 trillion state retirement fund will encourage flows out of the yen. The US dollar climbed to a more than four-year high after the Fed ended asset purchases that have supported the economy since 2008.
“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 US dollar, the lowest since December 2007, before ending the month down 2.4 percent at ￥112.32.
The US dollar rose for a fourth month against the euro, the longest rally since June 2010, gaining 0.8 percent to US$1.2525. It touched US$1.2486, the strongest since August 2012. The euro advanced 1.6 percent last month to ￥140.68.
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 last year.
The pound fell for a second week versus the US dollar, dropping for a fourth month, as traders pushed back expectations for when the Bank of England would raise interest rates amid signs of a slowing economic recovery.
The pound fell 0.6 percent this week to US$1.5994 as of 5pm in London on Friday. It dropped 1.4 percent versus the US dollar last month. Sterling strengthened for a second week versus the euro, gaining 0.5 percent to ￡0.7836. That pared its decline versus the 18-nation common currency since Sept. 30 to 0.6 percent.
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