Yen slides to lowest since 2010 amid bets on BOJ; euro advances

[NEW YORK] The yen weakened beyond 90 to the dollar for the first time in 31 months amid speculation that the currency will slide further as the Bank of Japan and the government work aggressively to spur economic growth.

The euro gained versus most of its most-traded peers as Spain's borrowing costs fell at a 4.5 billion-euro (S$7.4 billion) sale of bonds, underscoring increased confidence in European debt markets.

The Swiss franc dropped. The yen continued its longest stretch of weekly losses since 1989 amid bets that the BOJ will decide to conduct open-ended asset buying to stoke inflation.

The yen declined 0.2 per cent to 90.10 per dollar last week in New York and touched 90.21 on Friday, the weakest level since June 23, 2010. It was the 10th consecutive weekly loss. The Japanese currency depreciated 0.8 per cent to 119.98 per euro and reached 120.71, its weakest since May 4, 2011.

The euro slipped 0.2 per cent to US$1.3321. It climbed to US$1.3404 on Jan 14, the highest since Feb 29, 2012.

Switzerland's currency tumbled against all of its 16 major peers as signs that Europe's debt crisis is easing sapped demand for haven assets. The franc depreciated to 1.2569 per euro on Friday, the weakest since the Swiss National Bank imposed an exchange-rate cap in September 2011, and lost 2.1 per cent on the week to 1.2445.

European Central Bank president Mario Draghi said on Jan 10 there were "strong capital inflows" into the region. Yields on Spanish and Italian sovereign debt have declined, with Spain's 10-year yield falling to 5.08 per cent, from as much in December as 5.56, and Italy's dropping to 4.17 per cent, from 4.82.

Futures traders trimmed for a fifth straight week their bets that the yen will decline against the US dollar, figures from the Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain - so-called net shorts - was 65,727 on Jan 15, versus net shorts of 74,096 a week earlier.

Speculators reversed their euro bets for a third week, betting the currency will rise against the US dollar. Net longs totalled 7,315 on Jan 15, versus net shorts of 8,035 a week earlier and net longs of 5,126 the week before that.

The euro gained 1.9 per cent over the past year versus nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The Norwegian kroner was the best performer, climbing 5.2 per cent, while the dollar fell 2 per cent. The yen was the biggest loser, tumbling 18 per cent.

Japan's currency lost 6.5 per cent against the dollar over the past month after Prime Minister Shinzo Abe's Liberal Democratic Party swept to power. Mr Abe has called for "bold monetary policy" to defeat deflation and drive the yen lower.

At its meeting last month, the central bank expanded its asset-buying programme for the third time in four months, increasing its purchase fund to 76 trillion yen (S$1 trillion).

A gauge of currency volatility rose to a five-month high last week, increasing chances that price swings will wipe out profits. JPMorgan Chase & Co's G7 Volatility Index, based on three-month options on Group of Seven nations' currencies, increased to 9.19 per cent on Friday, the most since Aug 2.

Sterling was the third-biggest loser among major currencies last week, dropping the most against the dollar since June. The pound fell 1.6 per cent to US$1.5870. Norway's kroner also slid versus the greenback, depreciating 1.3 per cent to 5.6001.

The South African rand sank yesterday to its lowest level since Dec. 3, dropping for a third straight week amid concern labor protests in mining and agriculture will curb exports and slow growth in Africa’s largest economy.

Anglo American Plc’s platinum unit, the world’s largest miner of the metal, said Jan. 15 it may fire as many as 14,000 workers as it idles four shafts. Production cutbacks may curb South Africa’s exports, preventing the rand from gaining even as commodity prices rise, said Mohammed Nalla, head of strategic research at Nedbank Group Ltd.

The currency fell 1.8 percent this week to 8.8805 per dollar and touched 8.9181. It was the week’s worst performance after that of the franc.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
- Bloomberg

http://www.bloomberg.com/news/2013-01-19/yen-slides-to-lowest-since-2010-amid-bets-on-boj-euro-advances.html