[Glanteeignile]

Yen Drops Versus Peers as Tankan Fuels Easing Speculation

The yen slid for a second day against the euro after the Bank of Japan (8301)’s Tankan report showed sentiment failed to improve at the nation’s largest companies, stoking prospects the central bank will boost monetary stimulus.

Japan’s currency weakened versus all of its major peers before a report economists say will show manufacturing picked up in the U.S. in March, undermining demand for haven assets. The euro was within a cent of the strongest in a month against the greenback after European finance ministers increased their crisis bailout fund. Australia’s dollar advanced after a Chinese manufacturing gauge released yesterday unexpectedly rose, easing concern the world’s second-largest economy is slowing.

“The yen should be on the back foot because the Tankan survey was a bit worrying,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The impression given was the Bank of Japan might have to do more.”

The yen lost 0.1 percent to 82.98 per dollar at 8:25 a.m. London time. It slid 0.2 percent to 110.76 per euro, after declining 0.8 percent on March 30. Europe’s 17-nation currency was little changed at $1.3349 after reaching $1.3386 on March 27, the strongest since Feb. 29.

The Tankan index for Japan’s largest manufacturers was unchanged last quarter from minus 4 in December, the BOJ said today in Tokyo. That was less than the median estimate of minus 1 in a Bloomberg News survey of economists. A negative number means pessimists outnumber optimists.

Executives’ Sentiment
Today’s report showed that executives expect the sentiment index to remain negative at minus 3 in June.

“The worse-than-expected Tankan survey seems to be fueling talk that the BOJ will ease policy further,” Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore, said. “This is probably leading to selling of the yen.”

Traders added to bets the yen will weaken against the dollar. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen versus the U.S. currency compared with those on a gain -- so-called net shorts -- was 67,622 on March 27, compared with net shorts of 25,821 a week earlier, figures from the Commodity Futures Trading Commission show.

Manufacturing Gauges
BOJ policy board members are scheduled to meet April 9-10 and April 27. The central bank held off from expanding asset purchases at its meeting in March. It expanded bond purchases by 10 trillion yen and set a 1 percent inflation goal in February.

The Institute for Supply Management’s factory index for the U.S. probably rose to 53 last month from 52.4 in February, according to the median estimate of economists surveyed by Bloomberg before the report is released today.

An index of Chinese manufacturing climbed to 53.1 last month, the highest since March 2011, the logistics federation and the National Bureau of Statistics said yesterday. The measure has a pattern of rising each March.

The Australian dollar climbed versus all of its major counterparts as signs of an improvement in China’s economy supported the South Pacific nation’s export outlook. China is Australia’s largest trading partner.

“I would strongly suspect that support for the currency will be evident all week in the Australian dollar as shorts get taken off the table,” said Kurt Magnus, executive director of foreign-exchange sales in Sydney at Nomura Holdings Inc. A short is a bet that an asset’s price will fall.

The so-called Aussie added 0.7 percent to $1.0419 and rose 0.8 percent to 86.44 yen.

RBA Policy
The Reserve Bank of Australia will hold a policy meeting tomorrow. While all economists in a Bloomberg poll forecast the central bank will leave its benchmark rate unchanged at 4.25 percent, traders expect a cut of 73 basis points over the coming 12 months, according to a Credit Suisse Group AG index based on overnight index swap rates.

The euro was supported after the region’s finance ministers unveiled a package over the weekend including 500 billion euros in fresh bailout funds on top of 300 billion euros already committed to rescue programs, which together topped the symbolic $1 trillion mark. The total doubles when more than 1 trillion euros lent by the European Central Bank to aid the region’s banks is included.

The euro may weaken to the lower $1.32 level, which is on the conversion line of a weekly ichimoku chart, should it fail to rise above the base line, analysts at Bank of Tokyo- Mitsubishi UFJ Ltd., a unit of Japan’s largest financial group, wrote in a note today. The conversion line was at $1.3231 today, while the base line was at $1.3435, according to data compiled by Bloomberg.

Ichimoku charts are used to predict a currency’s direction by analyzing the midpoints of historical highs and lows. The conversion line plots the sum of the highest high and lowest low during the past nine trading days. The baseline is the same calculation during the past 26 days