Yen Weakens as Topix Reaches 2008 High; Lira Rallies From Record

Dec. 26 (Bloomberg) — The yen weakened to a five-year low against the dollar, sending Japan’s Topix to the highest close since 2008. Turkish stocks dropped to a four-month low after a cabinet overhaul, while the lira rebounded from a record low.

The yen slid 0.4 percent to 104.77 per dollar by 8:09 a.m. in London, after touching 104.84, the weakest since October 2008. Japan’s currency also fell to a five-year low versus the euro, while the Topix rose 1.7 percent. The Borsa Istanbul 100 Index dropped 0.2 percent, reversing a 1.2 percent advance. The lira gained 0.3 percent after earlier sinking to 2.1002 per dollar. Natural gas and platinum increased at least 0.7 percent, while Treasuries ended a two-day decline.

Bank of Japan Governor Haruhiko Kuroda said Japan is on track to achieve its 2 percent inflation target, while a U.S. report today is forecast to show initial jobless claims fell last week. Turkey’s Prime Minister Recep Tayyip Erdogan replaced 10 ministers amid central bank Governor Erdem Basci’s attempt to boost the currency. China estimates that growth will slow for a third year in 2013 amid challenges including worsening pollution and social conflicts.

“A reduction in the Fed’s quantitative easing is boosting bets for a weaker yen, which is lifting shares,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust Banking Co., a unit of Japan’s third-largest bank by market value. “China’s money market has stabilized. Risk appetite is likely to improve and send stocks higher.”

Amazon, UPS

Markets in Australia, New Zealand, Hong Kong, Indonesia, Germany and the U.K. are closed today. The MSCI Asia Pacific Index rose 0.4 percent, gaining for an eighth day and poised for the longest rally in three months.

The Standard Poor’s 500 Index closed at a record on Dec. 24 after data on U.S. durable goods and new homes beat estimates. The gauge has gained 29 percent this year, on course for its biggest annual advance since 1997. Shares of Amazon.com Inc. and United Parcel Service Inc. may move as the largest online retailer offered refunds on shipping charges after the biggest package-delivery company said overwhelming volume left it unable to deliver some packages by Christmas.

The Topix ended at 1,279.34, the highest level since August 2008, extending this year’s rally to 49 percent, the most among 24 major developed markets tracked by Bloomberg. The Nikkei 225 Stock Average climbed 1 percent, gaining for a seventh day, after the measure closed above 16,000 yesterday for the first time since 2007. Toyota Motor Corp., the world’s biggest carmaker, jumped 2.9 percent in Tokyo.

Japanese Automakers

Japanese automakers are bracing for a potential consumer backlash should tensions with China escalate after Prime Minister Shinzo Abe visited a shrine memorializing war-dead on Chairman Mao Zedong’s birthday. Nissan Motor Co., which sells more vehicles in China than any other Japanese automaker, said it was “closely monitoring” developments in Japan-China ties.

Minutes of the BOJ’s Nov. 20-21 meeting released today showed one board member said a slowdown in growth could represent a downward shift in trend. While Japan is not completely out of deflation yet, the economy is moving in the expected direction, Kuroda said after a meeting with Abe. The central bank buys more than 7 trillion yen ($67 billion) of the nation’s bonds every month to battle deflation.

The yen retreated against all 16 major peers except the Australian dollar. It slipped 0.4 percent to 143.42 per euro, after touching 143.45, the weakest level since October 2008. The yield on Japan’s benchmark 10-year note added 1 1/2 basis point to 0.71 percent, the highest since Sept. 18.

Monetary Policies

The yen lost 17 percent against the dollar this year, the biggest decline among the 16 major currencies tracked by Bloomberg after the South African rand’s 18 percent drop, amid speculation the BOJ will continue unprecedented stimulus while the Federal Reserve pares quantitative easing as the U.S. economy recovers.

The Bloomberg U.S. Dollar Index rose for a third day, gaining 0.1 percent, while Treasury 10-year yields fell two basis points to 2.96 percent. Initial jobless claims in the U.S. are expected to decline in the week ended Dec. 21, underscoring confidence expressed by the Fed when it said on Dec. 18 that it will reduce the pace of bond buying amid faster-than-estimated economic growth.

Australia’s dollar declined against all 16 major peers, dropping 0.5 percent to 88.84 U.S. cents, while it’s New Zealand counterpart slid 0.2 percent to 81.65 U.S. cents.

Turkey Turmoil

The Turkish lira rose as much as 0.4 percent to 2.0875 per dollar as the benchmark index headed for the lowest close in four months. Environment and Urban Works Minister Erdogan Bayraktar, an associate of Erdogan for two decades, resigned and called for the premier to step down too. Erdogan responded by reshuffling his cabinet.

Turkey’s central bank said Dec. 24 it would sell at least $6 billion through the end of January and make it more costly for lenders to park foreign currencies in its coffers. The lira, this month’s worst-performer in emerging Europe and Africa, rallied 1 percent that day after Basci announced the new tightening measures.

The Thai baht dropped for an eighth day to a three-year low amid concern political unrest will continue. Police fired tear gas and rubber bullets at protesters trying to break into a Bangkok arena where political parties were registering for a snap election meant to ease months of unrest. The benchmark SET Index decreased 0.9 percent.

China Growth

The Shanghai Composite Index closed at a three-week high yesterday as the benchmark money-market rate fell after the central bank injected funds for the first time in three weeks on Dec. 24. The People’s Bank of China is unlikely to conduct repurchase or reverse repurchase operations today, according to traders at primary dealers required to bid at the auctions.

China’s seven-day repurchase rate, a gauge of funding availability in the banking system, dropped 30 basis points to 5.33 percent, according to a daily fixing by the National Interbank Funding Center.

The country’s economic growth this year is likely to come in at 7.6 percent, compared with the government’s 7.5 percent target, Xinhua News Agency said, citing a report by the State Council. A 7.6 percent pace would mark a third straight annual drop in the expansion rate.

The SP GSCI Index of 24 commodities gained 0.1 percent. Natural gas climbed 0.7 percent to $4.446 per million British thermal units. Platinum increased 1 percent to $1,344.34 an ounce, while palladium added 0.7 percent. Copper futures in New York rose 0.2 percent. The London Metal Exchange is shut today.

–With assistance from Kevin Buckland in Tokyo. Editor: James Poole

To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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Yen Weakens as Topix Reaches 2008 High; Lira Rallies From Record