Yen extends drop past 101 per dollar after bonds data
Baku, May 10 (AZERTAC). The yen extended its decline to beyond 101 per dollar after a report showed Japanese investors became net buyers of foreign bonds, snapping the longest selling streak since January 2010. The currency fell versus all but two of its 16 major peers as the data supported speculation that stimulus measures spearheaded by Bank of Japan Governor Haruhiko Kuroda and Prime Minister Shinzo Abe are driving domestic investors to seek higher returns overseas. Australia`s dollar dropped toward parity with its U.S. counterpart after the Reserve Bank cut its benchmark interest rate to a record low this week. The South Korean won tumbled the most in more than three months. “Japanese investors buying foreign bonds means they are seeking higher yields abroad as yields in domestic bonds are too low,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management in Tokyo. “That`s a sign that Kuroda`s monetary easing and Abenomics are working. This also signals further weakening in the yen.” The yen depreciated 0.7 percent to 101.27 per dollar at 8:40 a.m. London time after earlier touching 101.37, the weakest since April 6, 2009. It slid 0.5 percent to 131.84 per euro. Europe`s single currency was little changed at $1.3039. For the week, the yen has depreciated 2.3 percent against the dollar, the biggest five-day decline since the period ended April 5. It has fallen 1.6 percent versus the euro. The 17-nation currency has slipped 0.7 percent against the greenback since May 3. The spread between 10-year U.S. Treasuries and same maturity Japanese government bonds widened to 1.21 percentage points yesterday, the most since April 11. Japanese investors were net buyers of foreign bonds in the past two weeks, after six weeks of sales, Ministry of Finance statistics showed today. They bought a net 309.9 billion yen of foreign bonds in the period to May 3, and 204.4 billion yen`s worth the week before. “For yen bears, I think they would be encouraged” by today`s release, said Roy Teo, a currency strategist at ABN Amro Bank NV in Singapore. “The yen should weaken toward around the 104 level in the second quarter and about 110 at the end of this year. Japan`s currency will be at 104 per dollar at year-end, according to the median of more than 50 economist estimates compiled by Bloomberg. The yen`s more than 21 percent slide in the past six months, the most among 10 major currencies tracked by Bloomberg Correlation Weighted Indexes, has spurred complaints from trading partners concerned it will cost their exporters market share. South Korea`s Finance Minister Hyun Oh Seok said last month that a falling yen is having a “considerable impact” on the nation`s economy that`s bigger than threats from North Korea.
The won tumbled 1.4 percent to 1,106.39 per dollar, the biggest drop since Jan. 28, on concern South Korean policy makers could weaken the exchange rate. “With the yen`s weakness, there`s generally downward pressure on the regional currencies,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo.
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