Weekly Forex Round-Up: Yen (JPY) Headed for another Week of Losses

On 14 December 2012, Reuters reported that the yen rallied from a nine-month low against the US dollar. Despite the advance, Japan’s currency is headed for a weekly loss, with the prospects for further monetary easing by the Bank of Japan (BOJ) weighing on the yen. The most anticipated event during the week was the policy meeting of the US Federal Reserve, with the news about the additional bond-buying introduced to replace the expiring “Operation Twist” predictably weakening the greenback against the euro, which is headed for a weekly gain.

**Yen Recovers from Nine-Month Low, Set for Weekly Loss**
As reported by Reuters, the yen, which earlier on Friday slid to a nine-month low against the greenback, clawed back some of the losses during the day. The dollar fell to ¥83.52 with a US report on inflation suggesting that prices fell in November for the first time in six months. “This inflation report indicates the Fed can continue to print as much money as it wants,” noted Joseph Trevisani, chief market strategist at Worldwide Markets, as quoted by Reuters.

Despite its Friday gains, the yen is still on track for a fifth week of losses against the greenback, as reported by Bloomberg. The yen has been under pressure during the last few weeks on speculation that the potential victory of the Liberal Democratic Party (LDP) might lead to further stimulus by the BOJ, given the reputation of LDP’s leader, Shinzo Abe, as a proponent of “unlimited yen printing”.

“The outcome for the Japanese election is not in any doubt, but what is perhaps in doubt is the timeline for any changes to economic policy at the Bank of Japan,” pointed out Andrew Wilkinson, chief economic strategist at Miller Tabak, as quoted by Bloomberg. “I would imagine the yen to be just as weak next week again.”
**Euro on Track for Weekly Gain**

!m[The Single Currency (EUR) Set For A Weekly Gain Versus The Greenback (USD)](/uploads/story/1035/thumbs/pic1_inline.png)Reuters reports that the euro rose to a high of $1.3119, its highest level in more than a week. Later, however, it surrendered most of those gains to trade little changed at $1.3074. The single currency is nevertheless headed for its biggest weekly gain against the dollar since the week ending November 25. Versus the yen, the euro climbed to an eight-month high of ¥109.98 and is set to end the week around 2.5 percent higher against Japan’s currency.

**Interesting Week for the Swiss Franc (CHF)**
Switzerland’s franc had an interesting week, with the decision of UBS AG (NYSE:UBS) to introduce charges on certain franc-denominated accounts sending the franc 0.4 percent lower versus the single currency on December 11. The news, which followed a similar move by another major Swiss bank, Credit Suisse (NYSE:CS), spurred speculation that the Swiss National Bank (SNB) might introduce further measures to weaken the franc at its policy meeting. The SNB, however, maintained the 1.20 floor, while indicating that it was prepared to buy foreign currency in unlimited amounts. The SNB news boosted Switzerland’s currency, which on Thursday rebounded from a three-month low versus the euro.
**Won (KRW) Completes Biggest Weekly Gain in Two Months**
On December 14, Bloomberg reported that South Korea’s won completed its biggest weekly gain in two months, climbing 0.6 percent this week to 1,074.68 per dollar in Seoul, the most since the week ended October 19, with the advance attributed to the Fed’s fresh stimulus.
“Asian currencies are strengthening as the region is likely to receive more foreign funds after the Fed’s move,” noted Lee Jin Ill, a currency dealer at Hana Bank, as quoted by Bloomberg. “What’s on the mind of traders in Korea is that the government may roll out more restrictive measures to slow the pace of the won’s gain.”
The won advanced this week despite North Korea’s rocket launch, with analysts explaining that the firing was expected by investors and consequently had a limited impact on financial markets.