Friday, 12 March 2010

Yen slips amid monetary easing expectations

The yen slipped yesterday, giving back recent gains, amid increasing expectations that the Bank of Japan will adopt further easing measures, while the pound sterling fell on persistent credit and economic concerns.

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Guanyu 道 said...

Yen slips amid monetary easing expectations

Reuters
11 March 2010

The yen slipped yesterday, giving back recent gains, amid increasing expectations that the Bank of Japan will adopt further easing measures, while the pound sterling fell on persistent credit and economic concerns.

The Japanese currency had been gaining near-term support from repatriation flows as Japanese corporates looked to bring offshore earnings back home for their fiscal year-end.

But a Reuters report that the Bank of Japan may ease monetary policy as early as next week pushed the yen to session lows against the US dollar and the euro.

The BOJ is leaning towards easing monetary policy again next week, sources said, but there is disagreement among policymakers on its board on how to justify such a move.

‘The BOJ easing story moved the market, causing the yen to weaken. The market doesn’t need a lot of excuses to sell the yen right now,’ said NAB currency strategist Gavin Friend.

At 1225 GMT, the US dollar was up around 0.5 per cent at 90.40 yen after pressing to 90.50 in earlier trade. The euro traded with gains of around 0.6 per cent at 123.10 yen.

Japanese machinery data released yesterday had added to easing expectations.

‘Japanese machinery orders were weak and underpinned the likelihood that the BOJ will act further at the March 16 BOJ policy meeting to stimulate the economy.’ said FOREX.com analysts in a note.

The pound sterling, already under pressure, dipped after an unexpected drop in UK industrial production data for January.

Trade-weighted pound sterling fell to an 11-month low. The unit was down 0.5 per cent at US$1.4925, after falling to US$1.4873, its lowest since March 2.

The pound sterling maintained its downtrend after falling on Tuesday on weak economic data, worries about Britain’s creditworthiness, and political uncertainty.

Data yesterday showed that Chinese exports and imports surged past expectations in February, underscoring the momentum in the world’s third-largest economy.

Commodity-linked currencies rose after the release of the Chinese economic report, with the Australian dollar climbing to a seven-week high against the US dollar.

‘They (Australian and New Zealand dollars) are benefiting from good Chinese data which suggest that the economy there is expanding strongly,’ Commerzbank analysts said in a note.

The Australian dollar rose as far as US$0.9171, its highest since Jan 20, according to Reuters data.

The New Zealand dollar rose 0.6 per cent to a three-week high of US$0.7076. New Zealand’s central bank is expected to keep interest rates unchanged when it announces its policy decision due at 2000 GMT.

The euro rose 0.1 per cent to US$1.3612 after hitting a session low of US$1.3546. The single currency was hurt on Tuesday after Fitch Ratings said that it still had a negative outlook on Portugal’s credit rating.

That fed concerns that peripheral euro zone economies may face debt problems similar to those of Greece, where a fiscal crisis has led investors to flee the euro in past weeks.