Singapore - The yen fell to a one-week low against the dollar as investors favoured higher-yielding assets after OPEC reached a preliminary deal that will cut production.
Japan’s currency weakened against all of its 31 major peers as oil’s advance fueled speculation that it would help central bank Governor Haruhiko Kuroda to achieve his inflation goals. Currencies linked to commodities strengthened, with the Malaysian ringgit advancing the most in a week and Norway’s krone touching the strongest level in almost five months.
“Higher oil is good news for the BOJ,” said Simon Pianfetti, a senior manager at the market solutions department at SMBC Trust Bank in Tokyo. “It would certainly help inflation to rise.”
The yen slid 1% to ¥101.66/$ at 08:05, after reaching ¥101.68, its weakest level since September 21. Japan’s currency declined 1% to ¥114.11/€.
Kuroda started on his quest toward a 2% inflation target by announcing massive asset purchases in 2013. He expanded those in 2014, before introducing negative interest rates in January of this year. A benchmark gauge of Japan’s consumer prices slumped 0.5% in July from a year ago.
Oil rally
“The rally in oil prices will be welcomed by the BOJ as it will push up the central bank’s target measure of inflation at the margin if oil’s rally is sustained,” said Mansoor Mohi-uddin, a Singapore-based strategist at Royal Bank of Scotland.
The ringgit advanced 0.5% to 4.1205 per dollar, headed for its its biggest one-day gain since Septemberee 22. Norway’s krone rose 0.1% to 8.0255 versus the greenback, adding to a 1% gain from Wednesday. The Norwegian currency reached 8.0214 Thursday, the strongest level since May 3.
The probability that the Federal Reserve will increase interest rates in December rose to 54% on Wednesday, from 50% a day earlier, after chair Janet Yellen told lawmakers that most of the central bank’s policy-setting group expect tightening this year.