The yen may drop to its weakest level versus the dollar since January 2008, spurred by comments set to be delivered Tuesday by Bank of Japan Gov. Haruhiko Kuroda, according to Credit Agricole SA.
The currency slid to a six-year low last week, following its worst month in September since January 2013, amid prospects for the BOJ to continue unprecedented monetary easing while the U.S. Federal Reserve weighs the timing of its first interest rate increase.
Kuroda is scheduled to hold a news conference after a two-day meeting of the BOJ Policy Board that started Monday. He reiterated Friday that he doesn’t think a weak yen is a minus for the Japanese economy overall.
“If Kuroda again states there are few demerits to a weaker yen, it would be a catalyst for more yen selling,” said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. “I expect the yen to make a run at 111.50 this week.”
That level marks the 50 percent “retracement” from the yen’s August 1998 low of 147.66 to its post-World War II high of 75.35 in October 2011, according to Fibonacci technical analysis.
Longer term, the yen will drop toward 112.63 per dollar, the 76.4 percent retracement of the 2007 low and the 2011 high, Saito said.
The yen touched 110.09 on Oct. 1, the weakest since August 2008. It tumbled 5.1 percent last month.
The BOJ will increase stimulus this year, according to about a quarter of the 33 economists surveyed by Bloomberg News between Sept. 26 and last Thursday.
An additional 42 percent expect an expansion of quantitative easing some time after the turn of the year. All of the respondents expect the BOJ to leave policy settings unchanged Tuesday.
Traders see a 76 percent chance the Fed will raise its target for overnight lending between banks by its September 2015 meeting, in what will be the first increase since 2006, futures data compiled by Bloomberg showed Sunday. That’s up from 73 percent odds seen on Sept. 1.
Fibonacci analysis, based on the work of 13th century mathematician Leonardo of Pisa, is founded on the theory that prices rise or fall by certain percentages after reaching a new high or low.