Yen Drops on Concern Japan May Weaken Currency; Pound Jumps

The yen slid from near its strongest level in 15 years against the dollar amid concern Japanese authorities may renew action to weaken the currency.

The yen also depreciated against the euro as Japan’s Chief Cabinet Secretary Yoshito Sengoku said he met today with a senior finance ministry official to discuss the global economy and foreign exchange markets. The pound surged against the dollar and the euro after Standard & Poor’s raised its outlook on U.K. debt and gross domestic product rose twice as much as economists estimated. The Swedish krona weakened.

“There is some underlying nervousness about intervention,” said Daragh Maher, deputy head of global foreign-exchange strategy at Credit Agricole SA in London. “The market got a little more edgy” as the yen neared 80 per dollar, Maher said.

The yen slid 0.7 percent to 81.40 against the dollar at 8:28 a.m. in New York, from 80.81 yen yesterday, when it reached 80.41 yen, the strongest level since April 1995. The euro bought 112.98 yen, compared with 112.85 yen. The U.S. currency was at $1.3888 per euro, compared with $1.3965. The pound rose 0.8 percent to $1.5849 and appreciated 1.3 percent to 87.62 pence per euro.

Japan’s currency has appreciated more than 5 percent against the dollar since authorities intervened in foreign- exchange markets for the first time in six years on Sept. 15. Finance Minister Yoshihiko Noda said on Oct. 23 the government stands ready to counter a rise in the yen if necessary. He also said Japan’s currency policy hadn’t changed after discussions about foreign-exchange markets at a Group of 20 nations meeting in Gyeongju, South Korea.

‘Surprise Move’

Japan’s Vice Finance Minister Fumihiko Igarashi said yesterday that currency-market intervention is most effective when it’s unexpected.

“A surprise move would probably be effective to some extent,” Igarashi said in an interview in Tokyo. “We can’t make an announcement in advance that we will act, but, on the other hand, we can’t say that we won’t act either.”

Japan’s government will make 1.5 trillion yen ($18.5 billion) from its foreign-exchange special account available to Japan Bank for International Cooperation for overseas investment and infrastructure projects, the finance ministry said.

The decision may be construed by some as “indirect intervention,” Sue Trinh, a senior currency strategist in Hong Kong at Royal Bank of Canada, wrote in a note to clients.

The pound rose for a second day against the euro after the U.K.’s outlook was raised to stable from negative by Standard & Poor’s, which affirmed the nation’s AAA ratings.

Bond Purchases

Sterling also appreciated as growth in GDP damped concern the Bank of England will restart its bond-purchase program next month to boost the economy. GDP rose 0.8 in the three months through September, after increasing 1.2 percent in the second quarter, according to data from the Office for National Statistics. Economists forecast a 0.4 percent gain, according to the median prediction in a Bloomberg survey.

“Those numbers were strong, which is going to be instructive for those who were thinking that QE could come as early as next month,” said Jeremy Stretch, executive director of foreign-exchange strategy at CIBC World Markets in London. “They’ve got an opportunity to pause now until the end of the year to see how the consumer holds up.”

The Swedish krona fell against all 16 of its most-traded counterparts after the nation’s central bank scaled back its interest-rate outlook, citing “weak developments overseas.” The Riksbank increased the main rate by a quarter percentage point to 1 percent today. The decision was predicted by all 20 economists surveyed by Bloomberg.

The krona depreciated 1 percent to 9.2905 per euro from 9.1955. It weakened 1.1 percent to 6.6595 per dollar.

Thailand’s baht fell amid concern the nation will unveil steps to slow fund inflows after the currency reached a 13-year high this month.

The baht dropped 0.3 percent to 29.89 per dollar. The Thai currency has risen 11 percent against the dollar this year, the best performer in Asia outside Japan.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net.

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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