Yen Surges against Euro on Speculation over Monetary Policy Divergence

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Yen Surges against Euro on Speculation over Monetary Policy DivergenceThe yen rallied to the highest level in four months versus the euro on bets that the Bank of Japan won’t expand economic stimulus when the policymakers meet on Thursday, which is contrary to the action taken by the European Central Bank, which boosted stimulus last week.

The yen rose 0.4 percent to trade at 138.07 per euro close to 2 p.m. in New York after earlier touching 137.91, its highest level since February 6. The yen surged 0.3 percent to 102.04 for a dollar. The euro plunged 0.1 percent to $1.3531 after touching $1.3503 on June 5, its weakest since February 6.

“The yen is accelerating due to a setback in risk appetite,” Robert Sinche, a Stamford, Connecticut-based global strategist at brokerage firm Pierpont Securities LLC, told Bloomberg. “The markets have looked at the inflation numbers, the first-quarter growth numbers, and come to the conclusion that he BOJ would need a lot more data on the second quarter before they could justify further policy action.”

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The Bank of Japan has been implementing a monthly bond purchase program that has mopped 7 trillion yen ($68.4 billion) worth of governments bonds being bought each month.

The euro has declined 0.8 percent over the past week against nine counterparts as monitored by Bloomberg Correlation-Weighted Indexes.

The Turkish lira declined 1.4 percent against the dollar on news that al-Qaeda-linked insurgents had raided Turkey’s consulate in Mosul, Iraq and made away with unknown number of hostages. The lira was trading at 2.1089, its lowest level in four days.

The New Zealand dollar rose 0.4 percent to trade at 85.58 U.S. cents after earlier surging 0.4 percent on Tuesday on speculation that the Reserve Bank of New Zealand will hike the benchmark cash rate to 3.25 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