Yen Falls to 9-Month Low Versus Dollar on BOJ Outlook

The yen fell to the weakest level in almost nine months versus the dollar amid speculation the party of Japanese opposition leader Shinzo Abe, an advocate of unlimited monetary easing, will win weekend elections.

The dollar gained against the majority of its 16 most- traded counterparts on haven appeal after Republican House Speaker John Boehner said the White House isn’t serious about cutting spending and “appears willing to slow-walk our economy right up to, and over, the fiscal cliff.” The yen slid against most of its major peers amid speculation the Bank of Japan (8301)’s Tankan survey will show manufacturers’ pessimism grew. The pound dropped after Standard & Poor’s lowered its outlook on Britain’s top credit rating to negative.

“The dollar-yen has been moving for Japan-specific reasons, like the Abe regime shift to a more dovish BOJ,” Dan Dorrow, head of research in Stamford, Connecticut, at Faros Trading LLC, said in a telephone interview.

The yen dropped 0.5 percent to 83.65 per dollar at 5 p.m. New York time, after touching the weakest level since March 21. It slid 0.5 percent to 109.39 per euro after depreciating to the least since April 4. The dollar was little changed at $1.3077 per euro.

Pound, Krona

The pound slipped after S&P lowered the outlook on Britain’s AAA ratings, citing weak economic growth and a worsening debt profile. The outlook, revised from stable, reflects the view that S&P has a one-in-three chance of lowering the ratings in the next two years, according to a statement from the ratings company.

“It’s not much of a surprise that the U.K. rating outlook has been cut,” said Ned Rumpeltin, head of Group of 10 currency strategy at Standard Chartered Group Plc in London. “Some of the ratings agencies are becoming more concerned that the targets are slipping. Over the next couple of days there will be some downside risk for the pound.”

Sterling declined 0.2 percent to $1.6112 and lost 0.3 percent to 81.16 pence per euro.

Sweden’s krona fell to its weakest level against the euro in more than five months after data released today showed consumer prices fell for the first time in three years and unemployment rose, increasing the likelihood that the central bank will lower interest rates next week.

The krona dropped 0.5 percent to 8.7343 per euro after reaching its lowest level since July 4.

Real, Kiwi

The Brazilian real decreased versus most of its major counterparts as the country’s swap rates dropped for a second day as evidence of an economic slowdown spurred speculation that the central bank will keep borrowing costs at record lows through the first half of next year.

The currency declined 0.7 percent to 2.0856 per U.S. dollar.

New Zealand’s dollar rose versus most of its major peers before a private report tomorrow forecast to show Chinese manufacturing is strengthening. China is New Zealand’s second- biggest export market.

The so-called kiwi gained 0.4 percent to 70.53 yen, touching the highest level since October 2008.

The dollar gained as Boehner repeated his insistence that President Barack Obama’s budget proposal is “anything but“ balanced, and accused the president of being “not serious” about cutting spending.

Fed Meeting

The greenback fell yesterday when Bernanke said at a press conference after a meeting of the Federal Open Market Committee that the Fed said it planned to “maintain accommodation as long as needed to promote a stronger economic recovery in the context of price stability.”

He added that monetary stimulus cannot offset the so-called fiscal cliff, the more than $600 billion package of tax increases and spending cuts that will come into force early next year if politicians fail to agree on a new federal budget.

Abe, whose Liberal Democratic Party leads in opinion polls before the Dec. 16 ballot, has called for a doubling of the central bank’s inflation goal to 2 percent and unlimited easing to revive growth.

The BOJ’s quarterly Tankan survey, released at 8:50 a.m. Tokyo time tomorrow, will show sentiment among large manufacturers slid to minus 10 in the fourth quarter from minus 3 in the third, according to the median estimate of 25 economists in a Bloomberg News survey. That would be the lowest since the first quarter of 2010.

The central bank is due to a hold a monetary policy meeting on Dec. 19-20.

“The market is pricing in a poor Tankan, an Abe majority and further BOJ stimulus, which all point to a weaker yen,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London.

The yen lost 6.2 percent in the past month, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 1.8 percent, while the euro gained 1.5 percent. The New Zealand dollar increased the most, strengthening 2.7 percent.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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