Yen Falls to 28-Month Low as CPI Decline Boosts Easing Prospects


The yen sank to a 28-month low as data showing a decline in Japanese consumer prices fanned speculation the central bank will heed government calls to step up cash infusions to end deflation.

JPMorgan Chase & Co. and Nomura Holdings Inc. cut forecasts for the Japanese currency citing stimulus plans from newly installed Prime Minister Shinzo Abe’s plan. U.S. President Barack Obama plans to meet Democratic and Republican congressional leaders today as a year-end budget deadline approaches. The won was set for a sixth weekly gain as data showed South Korea’s current-account surplus rose to a record.

“Policy expectations are behind the continuous decline in the yen because the Abe administration gives priority to measures against deflation and a stronger yen,” said Noriaki Murao, managing director of the marketing group in New York at the Bank of Tokyo-Mitsubishi UFJ Ltd. “The market tends to move in one direction with thin liquidity.”

The yen touched 86.64 per dollar, the weakest since Aug. 3, 2010, and traded at 86.44 as of 12:33 p.m. in Tokyo, down 0.4 percent from yesterday. It lost 0.4 percent to 114.49 per euro after earlier sliding to 114.70, the lowest level since July 11, 2011. The European currency added 0.1 percent to $1.3238.

Japan’s consumer prices excluding fresh food fell 0.1 percent in November from a year earlier, government data showed today, matching economist estimates in a Bloomberg News survey. The Bank of Japan (8301)’s inflation target is 1 percent, and Abe has said he may change the law governing the central bank if it doesn’t double its price goal.

Stronger Cooperation

Finance Minister Taro Aso said today that he agreed with BOJ Governor Masaaki Shirakawa to strengthen cooperation between the government and the central bank. The BOJ next meets Jan. 21-22.

JPMorgan revised its yen projections today, saying the currency will fall to 90 against the dollar in the second quarter next year as Japan’s trade surplus worsens and overseas investors factor in changes under Abe’s administration. Its previous estimate was 83.

The Japanese currency may decline to 117 versus the euro during the same period, wrote Tokyo-based strategists at JPMorgan Tohru Sasaki and Junya Tanase, adjusting their estimate from 108.

Nomura reduced its yen forecast to 90 per dollar for the second quarter from 85, citing Abe’s “aggressive” push toward a 2 percent inflation target. The yen may be at 90 by year-end, weaker than the previous forecast of 88, Yujiro Goto, Yunosuke Ikeda and Jens Nordvig, Nomura strategists, wrote in a research note dated yesterday.

Weekly Declines

The Japanese currency has lost 2.5 percent against the dollar since Dec. 21, set for the biggest weekly slide since Nov. 4, 2011. It has tumbled 2.9 percent against the euro, while Europe’s common currency has risen 0.4 percent this week versus the greenback.

The yen’s 14-day relative strength index dropped to 17 against the dollar and slid to 19 versus the euro. A reading below 30 indicates an asset’s decline has been too rapid and it may reverse course.

U.S. House Republican leaders announced that the chamber will meet on Dec. 30 — its first Sunday session in more than two years. Lawmakers are seeking to resolve their impasse over spending cuts and tax increases worth more than $600 billion, known as the fiscal cliff, that takes effect next month.

The won added 0.1 percent to 1,070.80 per dollar, having advanced 0.3 percent since Dec. 21. The sixth week of gains is the longest winning streak since July 6.

South Korea’s current-account surplus widened to an all- time high of $6.88 billion in November, according to figures today from the central bank. A separate report showed industrial production rose 2.3 percent last month from October, exceeding the 0.8 percent increase estimated by economists.

“The won started trading stronger on the current-account surplus and exporters will be selling dollars as the year-end approaches,” said Byeon Ji Young, a Seoul-based currency analyst for Woori Futures Co. “Still, there are concerns the government may intervene to prevent the won from appreciating on the year’s last trading day.”



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