Yen Strengthens Against Dollar as Exporters Repatriate Earnings
Oct. 30 (Bloomberg) -- The yen rose against the dollar, setfor its first weekly gain in three, on speculation Japaneseexporters purchased the currency after its decline increased theappeal of repatriating the proceeds of foreign sales.
Demand for the yen also increased after the Bank of Japansaid it will stop buying corporate debt at the end of the year,as central banks around the world phase out emergency measuresbegun during the financial crisis. The dollar headed for afourth month of losses against the euro, the longest stretch ofdeclines since 2004, as the U.S.’s return to growth in the thirdquarter boosted demand for higher-yielding assets.
“A lot of exporters were reluctant to come in and buy yenat below 90 per dollar and they’ve now come back to themarket,” said Lee Hardman, a foreign-exchange strategist inLondon at Bank of Tokyo-Mitsubishi UFJ Ltd. “There’s been adegree of buying after the BOJ’s decision to end some of itssupport measures.”
The yen strengthened to 91.01 against the dollar as of 8:33a.m. in London, from 91.41 yesterday in New York. Japan’scurrency was at 135.09 per euro from 135.51 yesterday. Thedollar traded at $1.4816 per euro, from $1.4822.
Large Japanese manufacturers expected the yen to average94.50 per dollar in the 12 months to March 2010, according tothe Bank of Japan’s quarterly Tankan survey released Oct. 1. Theforecast in the previous report was for a rate of 94.85.
Toyota Motor Corp. and Honda Motor Co., Japan’s two biggestautomakers, may increase overseas production as a stronger yenmakes exports less competitive. Japanese carmakers have lostU.S. market share to South Korea’s Hyundai Motor Co. after theyen rose to a 13-year high against the dollar in January.
‘Liquidity Is Ample’
Australia’s dollar is set for a record ninth month of gainsafter a rally in stocks worldwide and higher prices forcommodities that comprise more than half of the South Pacificnation’s exports.
“The recovery is still at work and the liquidity isample,” said Tomohiro Nishida, a dealer in Tokyo at Chuo MitsuiTrust & Banking Co., a unit of Japan’s seventh-largest bankinggroup. “You can’t stop money flying into higher-yieldingcurrencies at the expense of funding currencies.”
The MSCI Asia Pacific Index of regional shares advanced 1.5percent today and the Nikkei 225 Stock Average gained 1.5percent. The Standard & Poor’s 500 Index increased 2.3 percentyesterday and crude oil for December delivery increased 3.1percent to $79.87 a barrel.
The Australian dollar slipped 0.2 percent today to 91.28U.S. cents, trimming a 3.4 percent gain in October.
U.S. Recovering
The dollar fell the most against the South Korean won as aBloomberg survey of economists showed that the Institute forSupply Management-Chicago Inc.’s business barometer probablyrose to 49.0 in October from 46.1 in the previous month. Thereport is due today.
Adding to signs the world’s largest economy is recovering,the Institute for Supply Management’s factory gauge rose to 53.0in October from 52.6 in the previous month, according to aseparate Bloomberg News survey before the release on Nov. 2.Fifty is the dividing line between expansion and contraction.
The Commerce Department reported yesterday that U.S. grossdomestic product grew at a 3.5 percent annual pace in the thirdquarter, after shrinking the previous four periods. The medianforecast of 79 economists in a Bloomberg survey was for anexpansion of 3.2 percent.
Investors remained skeptical that the Federal Reserve willincrease borrowing costs early next year. Fed funds futures showa 34 percent chance that the central bank will lift its targetlending rate at the March meeting from a range of zero to 0.25percent, compared with a 47 percent likelihood a month earlier.
Bank of Japan
“The Fed is still far away from exiting credit easing,”said Kengo Suzuki, manager of the foreign bond department inTokyo at Mizuho Securities Co. “The hyper-liquidity will keep alid on the dollar.” The Federal Reserve Board holds a two-daypolicy meeting next week.
The Bank of Japan today said it will let programs to buycorporate debt expire at year-end as policy makers around theworld start phasing out emergency measures taken at the heightof the financial crisis.
The BOJ decided to end purchases of commercial paper andcorporate bonds from lenders as scheduled, while extendingunlimited collateral-backed lending through March 31, the banksaid in a statement released in Tokyo today. It kept thebenchmark interest rate unchanged at 0.1 percent.
‘Good Data’
“The BOJ’s decision to unwind some of its unconventionalsteps is being perceived among foreigners as limiting theavailability of excessive liquidity,” said Yuji Saito, head ofthe foreign-exchange group at Societe Generale SA in Tokyo.“This may damp appetite for yen carry trades, thereby pushingup the Japanese currency.”
The yen headed for its ninth-straight monthly declineagainst the New Zealand dollar, the longest slide since 1997.
“Good data from Japan will strengthen the risk appetitethat resurfaced on strong U.S. data,” said Takashi Kudo,director of foreign-exchange sales in Tokyo at NTT SmartTradeInc., a unit of Nippon Telegraph & Telephone Corp.
Separate Japanese government figures showed the job-to-applicant ratio, a leading indicator of employment trends,improved for the first time in more than two years. The ratiorose to 0.43 last month from a record low of 0.42 in August,meaning there are 43 jobs for 100 job seekers.
To contact the reporters on this story:Yasuhiko Seki in Tokyo at yseki5@bloomberg.net;Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
Last Updated: October 30, 2009 05:21 EDTSource: Bloomberg
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