Yen Advances against the Euro on Monetary Policy Differences

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Yen Advances against the Euro on Monetary Policy DifferencesThe yen accelerated the fastest in nearly a month against the euro as investors speculated that the Bank of Japan’s stimulus is taking effect while the European Central Bank is boosting stimulus to boost growth.

The yen rose 0.5 percent to trade at 138.62 per euro in mid-afternoon trade in New York. The yen also gained 0.2 percent to 102.36 per dollar. The euro lost 0.4 percent to $1.3542 after earlier declining to $1.3503 on June 5, the weakest level since February 6.

The Japanese currency gained as most economists forecasted that the BOJ will retain its economic stimulus when it convenes on June 12-13. The yen outmuscled the euro after data showed that production and inflation remained subdued in the euro area.

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“We’re going to be in for a period of euro weakness and there’s no reason why it won’t weaken against the yen as well given the policy divergence,” Brad Bechtel, a Stamford, Connecticut-based managing director at Faros Trading LLC told Bloomberg. “The writing is on the wall a little bit for some of these euro crosses.”

The euro further lost ground after new data showed that inflation in the Netherlands grew less than economists had estimated in May, spurring talk that ECB will continue with its stimulus measures in order to boost growth in the euro area. France’s industrial production also declined in April from a year earlier.

The euro has plunged 1.8 percent in 2014, based on data compiled by Bloomberg Correlation-Weighted Indexes, which monitors 10 advanced-economy currencies. The dollar has lost 0.2 percent while the yen has advanced 3 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com