Tokyo - The yen halted a three-day rally, the longest in a month, after increasing demand at an auction of Japanese government bonds renewed confidence the nation’s central bank will maintain its record asset purchases.
Japan’s currency dropped against more than half of its 16 major counterparts, erasing earlier gains that were driven by haven demand following unsuccessful talks between Greece and its creditors in the region. The Aussie headed for a four-day advance after minutes of this month’s Reserve Bank of Australia meeting suggested another rate cut isn’t imminent. The Bank of Japan began a two-day policy meeting on Tuesday in Tokyo.
“Today’s bond auction was the main focus of the market,” said Yuji Saito, director of foreign exchange at Credit Agricole SA in Tokyo. “When the auction went well as expected, it gave people the confidence to sell the yen.”
The yen was unchanged at 118.48 per dollar as 0f 6.53am in London, erasing a 0.2 percent advance. It was little changed at 134.50 per euro, after gaining for the past three days. The 19-nation shared currency traded at $1.1351 from $1.1355.
Japan’s 20-year bond yield dropped 8 1/2 basis points, the biggest decline since January 6, after Tuesday’s auction of 1.2 trillion yen ($10 billion) in the securities had a bid-to-cover ratio of 3.51, up from 3.26 at last month’s sale.
None of the 35 analysts surveyed by Bloomberg News from February 5-10 predict that Japan’s central bank will announce stimulus on Wednesday. Still, 26 analysts in the survey said the BOJ will ease policy by October.
The yen gained earlier today after Greece’s newly elected government said it couldn’t accept proposals for it to stick to the terms of the current bailout agreement.
Greek meeting
Greek Finance Minister Yanis Varoufakis led a Greek government delegation to Brussels with the aim of winning a six- month bridge package to give Greece the time and financial space to negotiate a post-bailout settlement. Creditors said that the Greek government must abide by the agreements struck by previous administrations. The Greek government said in an emailed statement that was “absurd” and “unacceptable”.
“Good luck to the policy sherpas behind the scenes trying to work to a constructive solution if that is anything to go by,” ANZ Bank New Zealand Ltd analysts including Sam Tuck, a senior currency strategist in Auckland, wrote in a research note to clients on Tuesday. “It’s looking more and more like the prisoner’s dilemma” for Greece, the note said, referring to a problem in game theory in which a rational choice for an individual has negative consequences for a group.
RBA minutes
Australia’s dollar rose 0.3 percent to 77.95 US cents, extending a three-day, 0.7 percent gain. Minutes of the RBA’s February 3 meeting showed policy makers debated whether to cut borrowing costs immediately or wait a month before choosing to lower the benchmark rate to 2.25 percent.
Swaps prices suggest a 59 percent chance the RBA will reduce Australia’s main rate at its next policy meeting in March, down from 71 percent odds on Monday, data compiled by Bloomberg show.
“The fact that RBA debated whether to move in February or March seems to suggest there may not be urgency for a follow-up cut,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. “That’s given support to the Aussie dollar.”
* With assistance from Kazumi Miura in Tokyo
Bloomberg