March 24 (Bloomberg) -- The yen fell against most of its 16 major counterparts, with South Africa’s rand and the Australian dollar posting the biggest gains, as the International Monetary Fund said the global economy was improving.
Japan’s currency slipped to its lowest level in almost two weeks versus the Aussie dollar amid speculation the Bank of Japan will boost stimulus as soon as next month to ease the impact of a planned tax increase. The euro declined against the dollar as a measure of German manufacturing activity fell to a four-month low. A measure of currency volatility dropped to the least since December 2012.
“We expect a weaker yen for quite a long time,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “What we see this morning I wouldn’t call risk on, but it’s a relaxation of what we saw last week where people were a bit concerned about geopolitical risk especially.”
Japan’s yen dropped 0.2 percent to 102.47 per dollar at 8:02 a.m. New York time. It was little changed at 141.02 per euro. The euro slipped 0.2 percent to $1.3763 after deprecating to $1.3749 on March 20, the lowest level since March 6.
Deutsche Bank AG’s Currency Volatility Index, based on three-month implied volatility on nine major currency pairs declined six basis points, or 0.06 percentage point, to 7.07 percent, the lowest level since Dec. 17, 2012.
IMF Managing Director Christine Lagarde said in a speech in Beijing that the world economy “is slowly turning the corner, although growth remains too weak and too unbalanced,” damping demand for haven assets.
Deflation is the biggest problem for Japan’s economy and a cause of yen strength, BOJ Deputy Governor Kikuo Iwata said today at a forum on monetary policy. The central bank will adjust monetary policy if its target of 2 percent inflation is deemed impossible to achieve, he told lawmakers on March 6.
About a third of economists predict the BOJ would expand stimulus as early as next month, when the government increases the sales tax to 8 percent from 5 percent, according to the results of a Bloomberg survey conducted from Feb. 26 to March 4.
“Our basic inclination is that dollar-yen is a buy on dips,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney. “We’re in the camp that thinks more easing would be warranted,” he said about BOJ monetary policy.
The yen has weakened 8.1 percent in the past 12 months, the third worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 0.6 percent and the euro gained 7.3 percent.
The yen declined today even as a gauge of Chinese factory output fell this month. The Purchasing Managers’ Index for dropped to 48.1 in March, HSBC Holdings Plc and Markit Economics Ltd. said. The preliminary reading compares with a final number of 48.5 in February. Readings below 50 signal contraction.
The Aussie dollar rallied 0.5 percent to 93.368 yen and touched 93.451, the strongest level since March 11.
The euro slipped toward the lowest in more than two weeks against the dollar as Markit said its German factory index was 53.8 this month, from 54.8 in February. Economists predicted a reading of 54.5, according to a Bloomberg survey. The currency earlier advanced after a gauge of French manufacturing rose to the highest since June 2011.
The German data “was weaker than market expectations,” said Jane Foley, senior foreign-exchange strategist at Rabobank International in London. “That of course is what matters for the market, hence we’ve had euro-dollar pushing lower again.”
A gauge of manufacturing in the euro area dropped to 53 from 53.2, a separate report from Markit Economics showed.