April 19, 2013 / 8:16 AM / 4 years ago

FOREX-Yen drops as Japan says no G20 opposition to BOJ action

* Dollar and euro up 1 percent on day versus yen

* Yen drops on Japan finance minister’s comments

* Global growth worries, fall in commodity prices weigh

By Anirban Nag

LONDON, April 19 (Reuters) - The yen fell on Friday as macro funds resumed selling after Japan said the Group of 20 accepted its stance that its aggressive monetary expansion was aimed at beating deflation and not at competitive devaluation.

The comments by Japanese Finance Minister Taro Aso eased concerns that the unprecedented monetary stimulus, which was announced earlier this month and triggered a drop in the yen to a four-year low versus the dollar last week, could be criticised at a G20 meeting in Washington.

The dollar rose 1 percent to 99.24 yen as investors such as macro funds stepped up yen-selling. Traders cited offers to sell the dollar at 99.25/30 yen but, beyond that, the U.S. currency was on course to hit 100 yen for the first time in four years. The euro rose more than 1 percent to 129.68 yen .

“Some in the market were worried so investors have reacted to news that Japan has not been criticised,” said Beat Siegenthaler, currency strategist at UBS. “Now the big thing that everyone is waiting for is outflows from Japan to take place. When it takes place, that will give another leg up for dollar/yen.”

Worries Japan could be criticised increased after the United States issued its semi-annual report on major trade partners’ the currency practices last week. It said it was watching Japan’s policies to ensure they were not aimed at devaluing the yen for competitive advantage.

G20 policymakers are expected to confirm a February pledge to avoid competitive devaluations, officials have said.

The Bank of Japan’s monetary stimulus triggered a tide of yen selling that lifted the dollar to a four-year high of 99.95 yen last week.

It also pushed the euro higher, despite worries about the region’s debt and expectations that the European Central Bank may lower rates to support flagging growth. The euro was up 0.1 percent at $1.3070.

The yen-selling took a breather earlier this week as renewed concerns about global growth prompted investors to trim bearish positions in the safe-haven Japanese currency.

Among the big losers this week were commodity currencies such as the Australian dollar, which had been stung by worries about growth in China, Australia’s single biggest export market.

The higher-yielding Aussie edged up 0.4 percent to $1.0330 and jumped 1.3 percent to 102.46 yen. It was, however, weaker against the dollar and yen for the week.

JAPANESE INVESTORS

In the absence of G20 criticism, traders and analysts say the yen is likely to come under pressure in coming months.

Capital flows data shows that Japanese investors, rather than make a dash toward overseas assets this month, have instead been repatriating funds from abroad.

However, analysts expect investors, including life insurers, to buy foreign assets in search of higher yields.

“Given the BOJ’s aim of flattening the JGB curve...Japanese longer-term investors such as life insurers and pension funds will be forced to go abroad,” said Callum Henderson, global head of FX research for Standard Chartered Bank, Singapore, referring to the yield curve for Japanese bonds.

“When or if it does happen, clearly it’s going to be yen negative,” he said, adding the bank forecast the dollar would be at 105 yen by the end of the second quarter.

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