Yen likely to stay volatile if BOJ seeks more easing

Traders’ expectations for swings in the yen climbed to a 17-month high amid speculation the Bank of Japan will expand monetary stimulus at its two-day policy meeting starting Monday.

The yen was near a two-and-a-half-year low and was set for a 10th weekly decline after BOJ Governor Masaaki Shirakawa, Finance Minister Taro Aso and Economy Minister Akira Amari met yesterday. The yen touched 90.21 per dollar yesterday, the weakest since June 23, 2010.

Japan’s two-year note yield slid to a seven-year low amid speculation the central bank will boost bond purchases to end deflation.

“Expectations for additional easing by the BOJ haven’t yet peeled off,” said Masato Yanagiya, the head of currency and money trading in New York at Sumitomo Mitsui Banking, a unit of Japan’s second-biggest financial group by market value. “With rising implied volatility, there are quite a few people who are alerted by the pace of dollar-yen moves.”

One-week implied volatility on the dollar-yen rate, derived from option premiums, reached 16.9 percent, the highest since August 2011.

The yen has lost 0.8 percent against the dollar since Jan. 11, poised for a 10th-straight weekly decline that’s the longest since 1989. It has slid 1.1 percent versus the euro this week, while Europe’s 17-nation currency has risen 0.3 percent versus the dollar.

Finance Minister Aso said in Tokyo yesterday that the BOJ and the government will issue a joint statement at the central bank’s Jan. 21-22 meeting. Bloomberg