Yen Snaps Drop as BOJ Member Concerned on Economy

The yen snapped a three-day decline versus the dollar after some Bank of Japan officials said they saw risks to the outlook for the economy. The yen was supported after minutes of the BOJ’s October meeting published today showed one member said it was “highly uncertain” whether inflation would rise toward the 2 percent target. The euro gained after China’s central bank governor said the currency is important to his nation’s reserve management. European Central Bank Executive Board member Joerg Asmussen, who has said negative deposit rates are a possible tool, will speak today. Australia’s dollar rose after Reserve Bank Deputy Governor Philip Lowe said the bar for intervention is high.

BOJ officials are “somewhat tentative and cautious,” said Callum Henderson, the global head of currency research at Standard Chartered Plc in Singapore. “Our expectation is for further gradual gains in dollar-yen, but it’ll be a slow grind rather than a dramatic move higher.”

Japan’s currency gained 0.1 percent to 101.55 per dollar at 7:02 a.m. in London after reaching 101.92 yesterday, the weakest since May 29. The yen was little changed at 137.40 per euro, above a four-year low. The euro rose 0.1 percent to $1.3531 from yesterday, when it slid 0.3 percent.

The BOJ said in April it wanted to achieve 2 percent inflation (ECCPEST) in about two years. Consumer prices excluding fresh food climbed 0.7 percent in September from a year ago. Central bank board member Sayuri Shirai proposed adding “attention should be paid to the downside risks” to the bank’s outlook report as “there was a high degree of uncertainty regarding developments in overseas economies and households’ employment and income situation,” the BOJ minutes showed.

Yen Gain

The yen will probably strengthen to 100 per dollar by Dec. 31, according to the median estimate of analysts surveyed by Bloomberg. The euro will probably be at $1.34 by then, a separate poll showed.

People’s Bank of China Governor Zhou Xiaochuan’s remarks on the euro were made in Beijing today, according to Market News International.

The ECB’s Asmussen is scheduled to speak in Berlin later today. He said on Nov. 23 he wouldn’t fundamentally exclude setting a negative deposit rate and that the central bank will continue to act if necessary to ensure price stability. Council member Ardo Hansson said in an interview in Tallinn on Nov. 22 that the Frankfurt-based central bank’s “options on rate cuts are still not fully exhausted and there are all kinds of other measures that are still on the table.”

Subdued Inflation

Inflation in Europe probably stayed close to the lowest level in almost four years in November with a reading of 0.8 percent, according to the median prediction of economists polled by Bloomberg News before a Nov. 29 report.

ECB policy makers will “continue to suggest that they may go down these alternate paths of negative rates, or possibly some kind of asset purchase, if and when they feel it’s necessary as the lack of inflation is becoming more entrenched,” said Emma Lawson, a Sydney-based senior currency strategist at National Australia Bank Ltd. “We are likely to see the euro come under pressure as they discuss all of their options.”

The Aussie climbed versus most of its major peers, advancing 0.3 percent to 91.86 U.S. cents.

“We don’t rule intervention in or out, that’s been a long-standing practice,” the RBA’s Lowe said in response to an audience question following a speech in Sydney today. “In the past, we have been prepared to intervene in the currency market when it’s clear the currency was misaligned or the market wasn’t working well. The threshold for intervention though is fairly high.”