Yen Strengthens Against Dollar After BOJ Adds to Monetary Easing
By Masaki Kondo and Lucy Meakin -
Oct 30, 2012 4:43 PM GMT+0530
The BOJ expanded its asset-purchase program by 11 trillion yen ($138 billion) to 66 trillion yen, the central bank said after a policy meeting today. The range of forecasts in a Bloomberg survey was from 10 trillion yen to 20 trillion yen. Demand for the yen as a refuge asset increased as Sandy, the largest tropical storm system on record, reached the American Northeast coast. The pound rose against the dollar after a report showed U.K. retail sales rose in October.
“The 10 trillion-yen increase was seen as a minimum expansion, and the failure to reach 15 trillion yen is very disappointing for markets,” said Yunosuke Ikeda, head of Japan foreign-exchange research at Nomura Securities Co. in Tokyo. “The yen is being bought as risk sentiment is worsening in part because of Sandy.”
Japan’s currency rose 0.5 percent to 79.44 per dollar at 7:06 a.m. in New York after reaching 79.28, the strongest since Oct. 22. The yen appreciated 0.1 percent to 102.90 per euro. Europe’s common currency climbed 0.4 percent to $1.2954.
U.S. stock trading will be canceled for a second day after Sandy made landfall in New Jersey. The storm froze travel, spurred evacuations and may affect 60 million people.
Inflation Target
Fifteen analysts forecast the BOJ would add 10 trillion yen to its 55 trillion yen program that buys assets such as government bonds, real-estate investment trusts and stock funds, according to a Bloomberg News survey. Four economists predicted it increasing purchases by as much as 20 trillion yen.“We’re in a ‘buy the rumor, sell the fact’ move for the yen at the moment,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore.
Japan’s industrial production slid 4.1 percent in September from the previous month, the most since last year’s earthquake and tsunami in March, government data showed today. The drop exceeded the most pessimistic estimate of economists surveyed by Bloomberg News.
Nissan Motor Co. Chief Executive Officer Carlos Ghosn said his company may have to move away from Japan to survive as the strong yen diminishes the nation’s competitiveness.
“If the exchange rate is high, we move out,” Ghosn said in Tokyo today. The yen’s “neutral range” is 100 to the dollar, he said.
‘Aggressive’ Policy
“You really do need a much more aggressive monetary policy to try to get the yen weaker, to try to offer a bit of relief to the manufacturing sector,” Richard Jerram, chief economist at Bank of Singapore Ltd. said in an interview on Bloomberg Television. “The yen will be down at 88 in a year’s time against the dollar as a result of the more aggressive monetary policy coming out of the BOJ.”Gains in the euro were tempered after a German report showed unemployment increased by twice as much in October as analysts forecast.
The number of people out of work rose a seasonally adjusted 20,000 from September to 2.94 million, the Federal Labor Agency in Nuremberg said. Economists forecast a gain of 10,000, the median of 31 estimates in a Bloomberg survey showed.
Spain’s economy shrank for a fifth quarter in the three months through September, the National Statistics Institute said in Madrid.
The pound advanced against the dollar as the Confederation of British Industry said a gauge of retail sales climbed to 30 in October from 6 a month earlier.
Sterling rose 0.2 percent to $1.6066 and was little changed at 80.62 pence per euro.
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