The yen traded 0.3 percent from a seven-year low versus the dollar on speculation Japanese Prime Minister Shinzo Abe is considering dissolving parliament before postponing a planned sales-tax increase.
The yen fell the most among 10 major currencies in the past month after policy makers surprised investors with further currency-depreciating stimulus from the Bank of Japan and pension reforms that allow more money to flow abroad. The euro, Australian and New Zealand dollars were little changed against the greenback after rising by at least 0.6 percent yesterday.
“The chances of a delay to the sales tax hike and an early election in Japan are rising, which is a plus for stocks, and in that risk-positive environment, the yen will fall and the dollar will rise,” said Yujiro Goto, a currency strategist in London at Nomura Holdings Inc. “I don’t foresee any change in the underlying trend for a weak yen and strong dollar.”
The yen was little changed at 115.74 per dollar as of 9:39 a.m. Tokyo time, after yesterday touching 116.10, the weakest level since October 2007. Japan’s currency gained 0.1 percent to 144.25 per euro. The 18-nation common currency was little changed after advancing 0.4 percent to $1.2475 in New York.
Japan’s currency has fallen 6 percent in the past month, the most among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes.
Abe has decided to hold an election next month and postpone a planned sales tax increase to April 2017, the Sankei newspaper reported today, citing unidentified officials.
Abe said in Beijing he hasn’t decided anything about the timing of an election and that he couldn’t comment on exchange rates as prime minister. Liberal Democratic Party lawmaker Hiroyoshi Sasagawa said in an interview that preparations have begun, though only Abe can call a general election.
Source: Bloomberg (12 Nov 2014)
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