The yen marching toward for its largest five-day surge against the dollar in seven weeks as investors sought haven assets amid persisting disputes ahead of a referendum that may lead to Crimea’s secession from Ukraine.
The Bank of Japan continued its record stimulus this week, keeping ammunition amid speculation a sales-tax hike in April will struck the economy. Goldman Sachs Group Inc. stated that another round of easing will kick the yen to a six-year low by mid-2014. The New York-based bank cut down its 12-month projection for the Australian dollar, indicating a weak domestic outlook. The euro pulled back from a two-year high after the European Central Bank signaled it’s monitoring increases in the currency.
“Yen strength across the board has been exerting itself as the best way to play risk aversion,” said Daniel Been, a Sydney-based senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. “We are watching very closely the referendum over the weekend,” he said of the March 16 Crimea vote on seceding from Ukraine for signs of a deterioration in sentiment.
The yen was at 101.82 per dollar as of 10:45 a.m. in Tokyo from 101.84 yesterday. It’s set for a 1.4 percent weekly hike, the largest since the five days through January 24. It inched up 0.1 percent to 141.13 per euro and has bolstered 1.6 percent since March 7. Europe's shared currency relinquished 0.1 percent to $1.3861 from yesterday, when it reached $1.3967, the topmost performing mark since October 2011.
More Pressure
The MSCI Asia Pacific Index of shares has decreased 3.3 percent this week, set for the largest pullback since June. The MSCI World Index of developed equities has sagged down 2.1 percent since March 7.
The U.S. and Germany intensify the pressure on Russia to retreat from plans to annex Crimea.
“If there is no sign of any capacity to be able to move forward and resolve this issue, there will be a very serious series of steps on Monday in Europe and here with respect to the options that are available to us,” U.S. Secretary of State John Kerry told a Senate panel in Washington yesterday. German Chancellor Angela Merkel said Russia is risking “massive” political and economic damage.
The Bank of Japan said in a March 11 statement it’s keeping a promised to expand Japan’s financial base at a pace of 60 trillion yen ($589 billion) to 70 trillion yen per year. Economists surveyed by Bloomberg estimated the nation’s economy will decline 3.8 percent in the second quarter, when the hike in the consumption tax is scheduled to take effect.
Further Stimulus
The yen will lose its stability as it becomes clear the Japanese central bank’s latest easing methods aren’t enough to reach Governor Haruhiko Kuroda’s target of triggering 2 percent inflation in two years, Goldman Sachs strategists Robin Brooks and Fiona Lake wrote in an emailed note to customers yesterday. “We think this will set the stage for another round of monetary stimulus around June,” they wrote, assuming the yen will slumped to 107 per dollar by mid-year.
Minutes of the BOJ’s February meeting published today showed many members see Japan’s economy marching toward the 2 percent goal for financial worth increases.
The Australian dollar was slightly altered at 90.24 U.S. cents, set for a 0.5 percent weekly drop.
Goldman Sachs trim down its 12-month projection for the Aussie to 80 cents from 85, and the six-month prediction to 82 from 88.
“We still think there is a good chance” the Reserve Bank of Australia will cut interest rates in coming months, the analysts wrote.
Comparative Returns
The Aussie has inched up 0.5 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed currencies. The yen has spiked up 3 percent, while the euro has climbed 0.1 percent. The dollar has relinquished 0.8 percent.
The euro held a slump from yesterday, when ECB President Mario Draghi said his forward guidance may aid to bring down the euro and lower real interest rates. The bank’s forward guidance states that policy makers will keep official interest rates at present or lower levels for an extended period of time.
While the exchange rate isn’t a policy target for the ECB, Draghi said in Vienna yesterday that
