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Yen Tumbles After BOJ Boosts Lending, Flags Willing to Ease More

     The yen fell against every currency except for Ghana’s after the Bank of Japan boosted lending programs and said it will continue monetary easing to meet its inflation goal.

The yen slid to the weakest this month per dollar as BOJ officials retained a pledge to expand the monetary base, doubled part of a growth lending program and said individual banks could borrow twice as much low-interest money as previously under a second facility. The greenback remained lower versus the euro before data that may show New York region manufacturing slowed. Australia’s dollar rose after minutes of the Reserve Bank’s Feb. 4 meeting signaled steady rates.

“The BOJ’s decision to stimulate the flow of money through extension and expansion of lending programs was well received,” said Yousuke Hosokawa, the head of the foreign-exchange sales team in Japan’s capital at Sumitomo Mitsui Trust Bank Ltd. “That is boosting risk appetite and yen selling.”
Japan’s currency lost 0.7 percent to 102.62 per dollar as of 7:06 a.m. in London after earlier touching 102.74, the weakest since Jan. 31. It slid 0.7 percent to 140.69 to the euro after reaching 140.86, a level unseen since Jan. 29. The dollar was little changed at $1.3710 against Europe’s shared currency after a 0.8 percent decline over the previous three days.

Ghana’s cedi was down 0.6 percent versus the yen, the only decline among more than 150 currencies tracked worldwide by Bloomberg.

The MSCI Asia Pacific Index of shares climbed 0.8 percent.
The Cabinet office said yesterday Japan’s gross domestic product expanded an annualized 1 percent from the previous quarter, missing analyst estimates and boosting speculation for more central bank easing in coming months amid the implementation of a sales-tax increase starting in April.

Rising Risks
“Dollar-yen has surged because there has been a loosening of monetary policy,” said Joseph Capurso, a Sydney-based strategist at Commonwealth Bank of Australia, referring to the expansion of the central bank’s growth funding and loan programs. “The risks are rising that the BOJ eases further by lifting the monetary base target around April if the evidence suggests that the tax increase is having a large negative effect on the Japanese economy.”

The yen will probably weaken to 110 per dollar by year-end, according to the median estimate in a Bloomberg poll of more than 50 economists, which would take it to levels unseen since August 2008. Analysts in a separate survey predict the euro will weaken to $1.28 over the period.

Biggest Drop

The dollar declined 1.3 percent in the past month, the biggest drop among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen strengthened 0.5 percent, while the euro added 0.1 percent.
The Federal Reserve Bank of New York’s general economic index probably fell this month after climbing in January to the highest since May 2012, according to the median estimate of analysts polled by Bloomberg before today’s data.

The U.S. central bank will release tomorrow the minutes of its January meeting. The Fed announced in December that it would start paring stimulus by cutting monthly bond purchases by $10 billion per month, and it decided on another reduction of the same size last month, to $65 billion.
“Even though the Fed is going to keep short-term rates anchored at zero for a prolonged period of time, at the margin monetary conditions in the U.S. will be slightly less accommodative because the Fed will continue to taper,” said Russ Koesterich, global chief investment strategist at New York-based BlackRock Inc., which manages $4.3 trillion.

Stronger Dollar
“At the margin, you’re likely to see easier monetary policy out of the European Central Bank and the Bank of Japan at a time when the marginal change at the Fed is actually toward less accommodation,” Koesterich said at a Sydney briefing today. “That should support a stronger dollar versus the euro and the yen.”

In Australia, minutes of the RBA’s meeting this month released today showed officials saw signs of record-low borrowing costs and a lower exchange rate helping growth. “If the economy evolved broadly as expected, the most prudent course would likely be a period of stability in interest rates,” according to the minutes.

The Aussie rose 0.1 percent to 90.43 U.S. cents after earlier touching 90.81, the strongest since Jan. 13.