Abe sales-tax rumor mill puts Yen into a spin with third strike
Prime Minister Shinzo Abe's sales- tax deliberations are sending the world's second-most traded currency pair into a spin.
The yen tumbled to a seven-year low and then retraced the losses, only to weaken again as traders tried to decode the latest signals from Japanese politicians over a potential delay in raising the levy. It extended a slide set off after the Bank of Japan on Oct. 31 expanded stimulus to a record and the nation's pension fund outlined a plan to increase overseas investment. The dollar rose against all 16 major peers before U.S. data today forecast to show retail sales rebounded.
"The U.S. dollar is broadly stronger, and the dollar-yen is probably leading that," said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney. "I don't think anyone has really changed their overall view that most likely the sales-tax hike will be delayed."
The yen slid 0.5 percent to 116.33 per dollar as of 7:19 a.m. in London. It earlier touched 116.38, the weakest level since October 2007. It traded at 144.74 per euro after declining 0.6 percent to 144.43 yesterday in New York. The 18-nation common currency fell 0.3 percent to $1.2444.
The yen headed for a fourth week of losses in which it's slumped more than 8 percent, the most among major currencies, as debate over an increase in the sales tax became the latest factor to drive the currency to its weakest level in seven years.
Dissolve Parliament
Japan's prime minister will hold a news conference next week to announce a delay in the sales-tax increase, Mainichi newspaper reported, without saying who provided the information. Abe will also explain the reasons for his decision to dissolve parliament at the news conference, according to the report.
Finance Minister Taro Aso said today an appropriate decision will be made on raising the nation's sales tax, taking into account economic conditions. Abe is likely to clarify any new timeframe for raising the sales tax should he decide to postpone a planned increase, Economy Minister Akira Amari said in Tokyo.
"The market likes the idea of a snap election and a delay in the sales-tax hike, and the yen is being sold against the dollar," said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. "I expect the yen to keep edging toward 120 per dollar."
Longer-dated Japanese government bonds rallied for a second day amid purchases by the central bank, sending yields lower. The yield on benchmark 30-year debt dropped as much as seven basis points to 1.42 percent today, the least since Nov. 4.
The BOJ offered to buy 1.5 trillion yen ($13 billion) of sovereign bonds in the secondary market, more than a quarter of which is for maturities of longer than 10 years.
In the U.S., retail sales last month gained 0.2 percent, according to a Bloomberg News survey of economists. They declined 0.3 percent in September.
The euro-area economy grew 0.1 percent in the third quarter from the previous three-month period, while a final report will confirm inflation accelerated 0.4 percent in October from a year earlier, according to the median estimates of economists surveyed by Bloomberg.
Germany's gross domestic product expanded 0.1 percent in the third quarter compared with the previous period, when it contracted a revised 0.1 percent.
The Aussie dollar dropped 0.4 percent to 86.84 U.S. cents, paring its gain this week to 0.5 percent. New Zealand's currency fell 0.4 percent to 78.49 U.S. cents.