Yen Slides to Seven-Year Low, Dragging Down Won; Aussie Weakens

20
Nov

Forex Trading Floors Academy brings up to date news from all round the world. Todays news was researched from Bloomberg.

The yen dropped to a seven-year low against the dollar amid speculation Prime Minister Shinzo Abe will win elections and extend his economic-stimulus program.

Japan’s currency declined versus all except one of its 16 major counterparts. A gauge of the dollar headed for its highest close since 2009. South Korea’s won fell to the lowest in almost 15 months as the plunging yen made Korean exports less competitive. Australia’s dollar fell to an almost two-week low after an index of Chinese manufacturing dropped in November. The euro declined against the dollar after a report showed a Purchasing Managers Index for factories and services output in the region unexpectedly fell this month.

“The dollar should be supported against the yen into elections,” said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. “Should U.S. yields start rising, a climb to 120 would be in sight.”

The yen slid 0.5 percent to 118.61 per dollar at 9:32 a.m. in London after depreciating to 118.98, the weakest level since August 2007. Japan’s currency fell 0.2 percent to 148.36 per euro having earlier depreciated to 149.14, the least since October 2008. The euro dropped 0.3 percent to $1.2511.

The yen has slumped 2.5 percent in the past week, the worst performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The Bank of Japan yesterday maintained record stimulus and Abe called an early election the previous day.

Three Arrows

Abe’s ruling Liberal Democratic Party will likely win a majority in the vote, Nicholas Smith, a strategist at CLSA Ltd. in Tokyo, wrote in a report dated Nov. 18. The Prime Minister’s three arrows of monetary easing, fiscal spending and structural reform designed to revive the economy has seen the yen slide more than 30 percent during the past two years.

Data earlier this week showed the nation’s gross domestic product unexpectedly shrank an annualized 1.6 percent last quarter, putting the economy in its fourth recession since 2008.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, rose 0.3 percent to 1,100.69, set for the highest close since March 2009.

The dollar strengthened yesterday as minutes from the Federal Reserve’s October meeting boosted speculation policy makers are moving toward higher interest rates.

Dollar Strength

“The dollar is likely to rise toward 120 yen this month,” said Masato Yanagiya, head of foreign exchange and money trading at Sumitomo Mitsui Banking Corp. in New York. “The Fed’s minutes mentioning about the decline in inflation expectations doesn’t change the dollar-strength story. It’s more likely there will be nothing left to stop the dollar’s ascent.”

U.S. consumer prices fell 0.1 percent last month, based on a Bloomberg News survey of economists before today’s report. Separate data today will show first-time jobless claims fell last week and a gauge of manufacturing rose in November.

The won weakened as the sliding yen and the prospect of higher U.S. interest rates weighed on South Korea’s currency.

Yen-Dollar Limit

“You need to ask where the yen is going against the dollar to gauge how far the won can weaken,” said Ryoo Hyun Jung , the Seoul-based chief currency trader for Citibank Korea Inc.

The won dropped 0.8 percent to close at 1,115.09 per dollar after reaching 1,117.07, the weakest level since August 2013.

The Australian dollar dropped for a second day as HSBC Holdings Plc and Markit Economics said their preliminary Purchasing Managers’ Index for China fell to 50 this month from 50.4 in October. Numbers above 50 indicate expansion. China, Australia’s largest trading partner, is headed for the slowest full-year growth in more than two decades.

The Aussie slid 0.4 percent to 85.81 U.S. cents after declining to 85.67 cents, the weakest since Nov. 7.

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