Yen (JPY) Advances Ahead of Bank of Japan Policy Meeting

on Oct 26, 2012

The yen strengthened against other major currencies, with investors taking a more conservative approach ahead the Bank of Japan’s upcoming policy meeting, the Financial Times reported on October 26. Other Asian currencies also advanced following data which signalled that China’s economy was improving.

**The Yen Strengthens against Other Majors**
The yen rose against the dollar, the euro, the pound and the Australian dollar, with traders taking profit on their positions after heavy selling of the yen during the week. The greenback lost 0.4 percent, falling below ¥80, whereas the euro declined to ¥103.46, losing 0.4 percent. The pound also lost 0.4 percent versus the yen, dropping to ¥128.92. Earlier during the week, however, the yen declined to its lowest level in four months, with the dollar gaining more than 0.5 percent to ¥80.33. The yen’s earlier losses were due to expectations about further monetary easing by the Bank of Japan.

**Bank of Japan Meeting**
The FT reports that the yen has recently been swinging between 78 and 80 versus the greenback as markets have been weighing the likelihood of the Bank of Japan intervening further so as to fight unwanted deflation.
!m[Chinese Economy Data Boost Asian Currencies ](/uploads/story/654/thumbs/pic1_inline.png)Pressure on the Bank of Japan to intervene has been mounting, with Japan’s minister of the economy Seiji Maehara calling for joint decisive action by the government and the central bank to support the country’s economy. “Central banks around the world are easing monetary policy. The BOJ itself set a 1 percent inflation goal in February but that hasn’t been achieved,” said Mr Maehara, as quoted by Reuters on October 25. “As price falls are continuing, I want to ask the central bank to pursue powerful monetary easing.” Reuters reports that Mr Maehara has expressed the wish to attend the upcoming Bank of Japan policy meeting.

**South Korea’s Won Leads Asian Currencies Gains**
The Japanese yen, however, was not the only Asian currency to advance, with Bloomberg reporting on October 26 that South Korea’s won led gains in Asian currencies during the week as data indicated that the Chinese economy was improving, brightening region’s export prospects.
A private survey showed that China’s manufacturing slump was easing, whereas reports earlier in October indicated that growth in exports and investment had gathered pace in September. “We are seeing signs of recovery in China and that is leading to optimism the global economy will also improve,” noted Yuji Kameoka, chief currency strategist at Daiwa Securities (TYO:8601), as quoted by Bloomberg.

The won advanced to a 13-month high, whereas the yuan reached the upper limit of the People’s Bank of China’s trading range. “China’s exports have been stabilising and rebounding, which helps boost bets on yuan appreciation,” commented Liu Dongliang, senior analyst at China Merchants Bank Co (SHA:600036, HKG:3968), as quoted by Bloomberg.
Elsewhere in Asia, the Philippine peso added 0.4 percent against the dollar, whereas India’s rupee gained 0.5 percent. Malaysia’s ringgit advanced 0.35 percent in the first four days of the week. Thai’s baht and Indonesia’s rupiah both declined by 0.1 percent.


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