Yen slides on BOJ report, eyes on Italian election

Mon Feb 25, 2013 5:49am EST
 
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By Richard Hubbard

LONDON (Reuters) - The yen hit a 33-month low against the dollar on Monday as the likelihood of sharply easier monetary policy in Japan grew, while Italian stocks and bonds gained in anticipation of the results of national elections.

Japan's currency's resumed its recent slide after reports emerged that the government would nominate Haruhiko Kuroda, a vocal advocate of aggressive monetary expansion, to be the next governor at the Bank of Japan.

A source familiar with the process told Reuters that an academic critical of central bank efforts to fight deflation would also be named as one of two new deputy governors.

"Both those candidates are in favor of more aggressive BOJ easing, and that is weighing upon the yen," said Lee Hardman, currency economist at Bank of Tokyo Mitsubishi.

The yen hit a low of 94.77 against the dollar, a level not seen since May 2010 before recovering to around 94 yen. The euro jumped to a high of 125.36 yen and then settled at around 124.37, well below a 34-month peak of 127.71 set early this month.

The yen had already fallen around 20 percent against the dollar over the past three months or so on expectations Japan would take more aggressive measures to defeat its persistent deflation and boost its recession-hit economy.

GLOBAL EASING PROSPECT

The likelihood of more aggressive easing by Japan comes after two top U.S. Federal Reserve officials on Friday argued in favor of ultra-loose policies in an effort to counter concerns of an early end to its massive asset-buying program.   Continued...

 
A woman looks at an electronic board showing Japan's stock price index at the Tokyo Stock Exchange in Tokyo February 6, 2013. REUTERS/Toru Hanai