The yen fell versus the dollar for the first time in three days, headed back toward a 29-month low, as Prime Minister Shinzo Abe told Bank of Japan (8301) governor Masaaki Shirakawa he wants the central bank’s inflation goal doubled.
The Mexican peso and New Zealand’s dollar gained as risk appetite improved. Japan’s currency slid versus all of its 16 most-traded peers after Shirakawa said the BOJ was in close contact with the government, adding to bets policy makers will boost stimulus that tends to debase the yen. The bank meets next week. The euro fell for a second day against the greenback before the European Central Bank meets tomorrow.
“The market bias is still to take the yen lower,” Vassili Serebriakov, a foreign-exchange strategist in New York at BNP Paribas SA, said in a telephone interview. “Overall markets are still focusing on the Bank of Japan and the upward revision of the inflation goal or target. That’s what still motivates the selling of the yen.”
The Japanese currency weakened 0.9 percent to 87.88 per dollar at 5 p.m. in New York. It slid on Jan. 4 to 88.41, the weakest level since July 2010. The yen declined 0.8 percent today to 114.81 per euro after depreciating on Jan. 2 to 115.99, the weakest since July 2011.
The euro depreciated 0.1 percent to $1.3064 after falling 0.3 percent earlier to $1.3037. It pared losses after failing to drop below $1.30. The currency last traded below that level Dec. 12, before rising to an eight-month high of $1.3308 on Dec. 19.
“It’s been a steady feature recently,” Sebastien Galy, senior foreign-exchange strategist at Societe Generale SA, said by phone from New York. “You don’t break below $1.30, and then bounce back.”
The Dollar Index (DXY), which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trade partners, rose for a second day. It advanced 0.3 percent to 80.542 after touching a six-week high of 80.868 on Jan. 4.
Mexico’s peso rose versus all of its major counterparts, rallying 0.6 percent to 12.7223 to the U.S. currency. The New Zealand dollar, nicknamed the kiwi, gained 0.4 percent to 83.96 U.S. cents and touched 84.10, the highest level since Dec. 19.
Stocks rose, snapping a two-day slide, with the Standard & Poor’s 500 Index gaining as much as 0.5 percent before trimming the gain to 0.3 percent.
The euro may rise versus the yen to the strongest level in almost 21 months even as it approaches a key level of resistance, Cilline Bain, a London-based technical analyst at Credit Suisse Group AG, wrote today in a client note.
The shared currency, which is in an upward corrective period after falling to a 12-year low in July, has “gained traction” at 113.50 yen and should test 116.02, Bain said. If it breaches that level, the euro may reach 121.94 yen, the highest since April 2011, she said. Resistance is an area on a chart where sell orders may be clustered.
The yen declined versus major peers as Abe talked with Shirakawa at a meeting of Japan’s Council on Economic and Fiscal Policy in Tokyo. The regular gatherings resumed today after being abolished by the previous government. Minutes will become available three business days after the meetings are held, according to the Cabinet Office.
Abe said the BOJ should aim for 2 percent inflation, double the current goal.
“The yen is going to continue to weaken further from here,” said Fabian Eliasson, vice president of corporate foreign-exchange sales at Mizuho Financial Group Inc. (8411) in New York. “You have BOJ meetings coming up where I think further stimulus will be added into the market. I think they’re going to continue to support a weaker yen.”
The BOJ pledged last month to reconsider its inflation target at its next board meeting on Jan. 21-22. Finance Minister Taro Aso said last week that cooperation between the government and central bank was important for ending deflation, which he said is the government’s biggest economic priority. Shirakawa’s five-year term ends on April 8.
The yen has tumbled 7 percent over the past month, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as Abe was elected with a pledge to increase monetary stimulus to spur growth. The dollar weakened 0.3 percent, while the euro gained 0.8 percent.
“We have been expecting a weaker yen for the longest time, and finally we saw that move after the elections in Japan and prospects for more easing by Bank of Japan,” Sireen Harajli, a foreign-exchange strategist in New York at Credit Agricole SA, said in a telephone interview.
The ECB will keep its main refinancing rate at a record-low 0.75 percent tomorrow, according to the median forecast of 55 analysts in a Bloomberg survey. Five predicted the central bank will lower the rate to 0.5 percent.
The currency gained as much as 0.8 percent to 3.117 to the dollar, the biggest intraday jump in a week, before trading at 3.1212, up 0.6 percent.
Sterling fell to the lowest level against the dollar since Nov. 30 after data showed Britain’s trade deficit was little changed in November as exports rose, led by chemicals and intermediate goods. The pound touched $1.5993 before trading at $1.6023, down 0.2 percent.
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