* BOJ governor reiterates pledge to pursue powerful easing
* Euro steadies after volatile trading overnight
* Commodity currencies retreat as yo-yo theme persists
* IMF funding talks at G20 meeting eyed
By Antoni Slodkowski
TOKYO, April 20 (Reuters) – The yen hovered near its lowest
levels in ten days against the dollar on Friday and was set to
stay under pressure on expectations of more easing by the Bank
of Japan next week, although its outlook further out is less
certain.
The greenback stood at 81.63 yen, having hit a 9-day
high of 81.74 the day before. That brought the April 10 peak of
81.87 into focus. The euro climbed as high as 107.35,
staging a powerful comeback from Monday’s trough of 104.63.
Reinforcing expectations that the central bank could ease
its already super-loose monetary policy, governor Masaaki
Shirakawa said it will continue powerful monetary easing until a
1 percent inflation target is in sight.
Piling more pressure on the bank, a senior International
Monetary Fund official said the BOJ should accommodate more to
support Japan’s still-fragile economy as it has room to take
unconventional steps.
“We expect a rise of at least 5 trillion yen in the BOJ’s
asset purchase programme at the 27 April meeting, with a
significant bias toward risk asset purchases,” said Naomi Fink,
Japan equity strategist at Jefferies.
But traders said the market has already priced in a policy
loosening and more steps may be needed to have a significant
impact on markets.
“In order to propel markets further upward, easing of
greater than 5 trillion yen, particular emphasis on risk assets,
dovish rhetoric indicating further steps to come, or a
combination of some or all of the above is needed,” said Fink.
The dollar was also supported on the back of importer buying
with traders citing strong bids below 81.50 yen.
OTHER FACTORS
While some traders aknowedged that the BOJ’s easing bias was
helping weaken the currency, they pointed out that it was not
the major factor behind its big 6 percent fall this year.
The yen has weakened broadly on the pick-up in risk
sentiment earlier in 2012 caused by tentative calm in the euro
zone, they said. Japan’s current account surplus also hit a
15-year low in 2011, the country posted a record trade deficit
in January and fossil fuel imports surged after the Fukushima
disaster, all of which have weighed on the yen.
“Even if the BOJ comes up with something very powerful, my
sense is that players would first rush to take profits on the
dollar and only after that start to think what the bank’s move
really means,” said a senior spot trader for a major Japan bank.
He pointed to the relatively small scale of the bank’s
easing, and noted that recent soft U.S. data has shifted the
focus back onto the dovish policy of the Federal Reserve.
The number of Americans claiming unemployment benefit for
the first time fell less than expected last week, while factory
activity in the Mid-Atlantic region slowed sharply this month
and U.S. home resales fell again in March.
“That possiblity (of Fed easing) still looms somewhere there
and prevents many players from piling more aggressively into the
dollar and selling the yen,” he said.
CHOPPY SESSION
Against the dollar, the euro emerged from a choppy overnight
session none the worse for wear. It hit a high of $1.3166
following a successful Spanish bond sale but then dropped on
rumours, later denied, of a possible French rating downgrade.
It was barely cahnged at $1.3143, comfortably within the
well-trodden range of $1.30-$1.32.
The Australian dollar, though, nursed losses after
disappointing U.S. data and poor earnings sapped risk appetite.
The Aussie retreated to $1.0318, falling for a
second day. However, it too remained within this week’s band of
$1.0305-1.0418, with markets yet to find enough momentum to
break out of the current range.
“Now, with the G20 convening in Washington, much attention
will be drawn to how and where the International Monetary Fund
draws up additional funding from in order to further beef up
Europe’s bailout funds,” said Christopher Vecchio, analyst at
DailyFX.
“Should the G20 decide that the IMF’s funding capacity is
adequate…I expect the European and commodity currencies to
depreciate against the yen and U.S. dollar over the coming
sessions.”
The IMF’s bid to win a big boost in funding to handle the
euro-zone debt crisis hit a speed bump on Thursday when Brazil
demanded more power at the IMF for emerging economies as a
condition for lending it extra cash.
