Kuroda breathes easier after yen pares this year's gain to 10%

[SYDNEY] The yen headed for its worst week since Bank of Japan governor Haruhiko Kuroda announced a negative interest rate policy, falling from near levels that some analysts have said may spark market intervention and lead to additional policy easing.

The currency declined after Mr Kuroda said on Thursday in Washington that he had no plan to bring up foreign-exchange markets or currency intervention at a Group-of-20 meeting because those issues are under the purview of Japan's Ministry of Finance.

A gauge of the US dollar versus its major peers pared gains after Chinese industrial production beat analyst estimates, boosting demand for currencies linked to the Asian economy's growth. The New Zealand dollar and Korean won led gains among 16 major currencies.

"The yen will weaken because we think the BOJ will end up delivering a package of measures which the stock market will like and probably the yen will weaken as a result of that," said Ray Attrill, co-head of currency strategy at National Australia Bank Ltd in Sydney.

The yen fell 0.3 per cent to 109.71 per US dollar as of 11:50 am in Tokyo, declining 1.5 per cent this week and paring this year's advance to 9.6 per cent.

The currency was set for the steepest weekly slide since the period ended Jan 29, the day the BOJ announced its negative rate strategy. It slipped 0.2 per cent to 123.48 per euro.

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major currencies, was little changed on Friday after climbing as much as 0.1 per cent. It is set for a 0.1 per cent weekly advance, ending back-to-back declines.

G-20 Meeting

The yen's advance to a 17-month high of 107.63 per US dollar on April 11 prompted officials including finance minister Taro Aso and chief cabinet secretary Yoshihide Suga to say that the government is ready to take action to halt gains if necessary.

At the G-20 meeting in Washington, Mr Aso and US Treasury Secretary Jacob J Lew agreed on the importance of countries honoring exchange-rate commitments, according to a statement.

The G-20 said in February that members will "refrain from competitive devaluations and we will not target our exchange rates for competitive purposes."

Recent strength in the yen is undercutting the competitiveness of Japanese exporters and hampering Mr Kuroda's efforts to attain a 2 per cent inflation target.

Some economists have said the BOJ governor will have to expand his easing program at an April 27-28 meeting and the central bank is likely to cut its outlook for prices and growth. Estimates for when authorities may intervene to sell the yen ranged from 95 to 110 in a survey of 14 analysts this month.

The kiwi and Australian dollar climbed along with the won after reports showed China's economy stabilized last quarter as the property sector rebounded, markets steadied, and loose monetary policy helped spur an improvement in factory conditions.

Gross domestic product rose 6.7 per cent in the first quarter from a year earlier, meeting the median projection of economists Bloomberg surveyed and in line with the government growth target of 6.5 per cent to 7 per cent for the full year.

Industrial output climbed 6.8 per cent in March from a year earlier, versus the estimate for 5.9 per cent growth.

"With China data coming out better, the market has a better risk appetite," said Andy Ji, a Singapore-based foreign exchange strategist and economist at Commonwealth Bank of Australia.

"There's a tendency for the yen to weaken. The yen has strengthened to some extent by safe-haven demand. Aussie and New Zealand dollars will be very well supported."

New Zealand's dollar gained 0.5 per cent to 68.80 US cents and 0.7 per cent to 75.44 yen.

Australia's currency climbed 0.2 per cent to 77.10 US cents and 0.5 per cent to 84.57 yen.

The won advanced 0.5 per cent to 1,150.96 against the greenback.

BLOOMBERG