Dollar Trades Near 15-Year Low Versus Yen Amid Fed Speculation

The dollar was near a one-month low against the euro amid speculation the Federal Reserve will buy additional Treasury securities this year to help sustain growth as the economic recovery falters.

The Swiss franc traded near the strongest since November versus the greenback as declines in Treasury yields sapped demand for the dollar. Economists forecast reports this week will show U.S. industrial production cooled and jobless claims increased. The yen fell against most of its major counterparts on speculation that Japanese importers sold the currency to take advantage of its surge to a 15-year high.

“Declines in Treasury yields suggest that people are still cautious about investments in riskier assets and there are high expectations for additional monetary easing,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd. “This will weigh on the dollar.”

The dollar was at $1.3008 per euro as of 9:50 a.m. in Tokyo from $1.2998 in New York yesterday when it reached $1.3033, the weakest since Aug. 11. The dollar traded at 83.08 yen from 83.04 yen yesterday when it touched 82.93, the least since May 1995. The euro fetched 108.11 yen from 107.92.

U.S. industrial production rose 0.2 percent in August after increasing 1.0 percent in the previous month, according to a Bloomberg News survey before today’s data. Initial jobless claims in the world’s largest economy increased to 459,000 in the last week from 451,000 a week earlier, according to a separate survey before tomorrow’s figure.

Fed Watch

Economists at Goldman Sachs Group Inc. expect the Fed to announce as early as November a program of asset purchases to support a weak economy. Treasury purchases may total about $1 trillion in another round of quantitative easing, according to Jan Hatzius, chief U.S. economist for Goldman Sachs.

The New York-based firm correctly projected yields would slide in 2010 as the recovery faltered, and forecasts the 10- year note will end the year at 2.5 percent. Bloomberg News reported the Goldman Sachs estimate this week.

The 10-year Treasury note’s yield held at 2.68 percent, after dropping yesterday to touch 2.66 percent, the least since Sept. 9.

The Swiss franc was at 0.9960 per dollar from 0.9962 yesterday when it hit 0.9933, the strongest since November. Investors traditionally buy the franc during times of financial and economic turmoil because of the perceived stability of Switzerland’s economy, as its trade surplus frees the nation from dependence on overseas capital.

Importers

The yen fell against higher-yielding currencies as Japanese importers sold it.

“Selling of the yen from Japanese importers for the settlement purpose is barely preventing the yen from hitting a fresh 15-year high,” said Takashi Kudo, general manager of market information service at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. in Tokyo.

Losses in the yen were limited on speculation Japanese Prime Minister Naoto Kan’s election win over party rival Ichiro Ozawa reduces the likelihood for intervention to curb the currency’s appreciation.

Kan yesterday defeated a leadership challenge from Ozawa, who pledged intervention for the first time in six years to support the export-led recovery. Kan hasn’t called specifically for yen sales, instead saying last week that he is ready to act.

“Intervention is seen as less imminent,” Marc Chandler, New York-based global head of currency strategy at Brown Brothers Harriman & Co., wrote in a note. “The yen continues to strengthen. Market talk focuses on 80.”

Joint Intervention

The yen has risen 14 percent this year against a basket of currencies from 10 developed-world nations, the best performer of the group, according to Bloomberg Correlation-Weighted Currency Indexes. The currency’s strength has prompted policy makers to consider measures to curb its appreciation, which makes Japanese exporters’ products more expensive.

Some analysts have said that intervention by Japan may not weaken the yen for long unless it’s conducted together with overseas authorities.

“Joint intervention probably can’t be done,” said Marito Ueda, Tokyo-based senior marketing director at FX Prime Corp., a foreign-exchange margin company. “Even intervention in the overseas markets, which Japan asks for, may not be possible. So, intervention may be done only in the Tokyo market, which means any impact could be very limited.”

To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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