There’s been no better currency in 2011 than the yen and strategists forecast more gains, even as Japan promises to intervene again in foreign-exchange markets and expands the world’s biggest debt burden.
The yen’s advance against every major currency, including a 4.1 percent climb against the dollar, illustrates the anxiety in global markets as Europe’s debt crisis stretched into a second year on the heels of the collapse of Lehman Brothers Holdings Inc. and the U.S. housing market crash. Though bond yields in Japan are the second-lowest in the world and government borrowings are double the size of the economy, foreign ownership of its debt is the highest since 2008.
Japanese officials sold at least 14.3 trillion yen ($183 billion) this year to stem gains that cut profits for exporters from Toyota Motor Corp. to Nintendo Co., and Finance Minister Jun Azumi has pledged more action. Intervention in 2012 may fail again as financial turmoil attracts investors to the world’s third-most traded currency for its low volatility.
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S. Korea Consumer Index Falls After Kim Death
South Korean consumer confidence fell to a three-month low in December, as concern the political outlook in the North will worsen in the wake of Kim Jong Il’s death compounds the risk from Europe’s debt crisis.
The sentiment index fell to 99, from 103 in November, the Bank of Korea said in an e-mailed statement today. A reading below 100 indicates pessimists outnumber optimists. The survey was conducted between Dec. 14 and Dec. 21. North Korea announced the death of its leader on Dec. 19, with his son Kim Jong Un, thought to be under 30, to succeed as ruler.
Policy makers in the South pledged to take steps as needed to stabilize markets in the aftermath of the North’s announcement, and an initial slump in equities was recouped within days. While the government said Dec. 21 that South Korea had so far seen little impact to its economy, Asia’s fourth largest, any sign of prolonged impact to consumer spending may spur monetary and fiscal stimulus, economist Kong Dong Rak said.
“We don’t know what will happen in North Korea and this makes people so wary,” said Kong, a fixed-income analyst at Taurus Investment & Securities Co. in Seoul. “Both the central bank and government may have to come up with stimulus if consumers and companies reduce spending in fear of worse things in North Korea or Europe.”
The Bank of Korea kept the benchmark seven-day repurchase rate unchanged at 3.25 percent for a sixth straight meeting this month, refraining from raising borrowing costs as the deepening European crisis and global slowdown imperil exports by companies including Hyundai Motor Co. and Samsung Electronics Co. The central bank expects economic growth in the country to slow to 3.7 percent and inflation to ease next year.
