Yen Rises For Third Day on Bets BOJ Policy Insufficient

The yen rose for a third day against the dollar, the longest run of gains in almost two months, amid speculation measures announced by the Bank of Japan (8301) won’t be enough to boost economic growth and weaken the currency.

The yen strengthened versus most of its 16 major peers before consumer-price data this week forecast to show the BOJ’s policies have failed to stoke inflation. The central bank increased its inflation target to 2 percent yesterday. South Korea’s won declined against the dollar after the country’s finance minister said recent advances were too steep.

“The big names are deciding they’re not going to bank too much on yen weakness right now,” Sireen Harajli, a foreign- exchange strategist in New York at Credit Agricole SA, said in a telephone interview. “That’s a continuation from yesterday.”

The yen appreciated 0.2 percent to 88.53 per dollar at 9:14 a.m. New York time. It has strengthened 1.8 percent over the past three days, its longest run of gains since the period ended Nov. 26. It reached 90.25 on Jan. 21, the weakest level since June 2010. The yen gained 0.2 percent to 117.97 per euro. Europe’s shared currency was little changed at $1.3324.

The euro rallied as much as 0.3 percent as U.K. jobless claims unexpectedly fell in December and a quarterly measure of unemployment also dropped, underlining the resilience of the labor market in the face of a weak economic recovery. The pound rose 0.2 percent to $1.5868.

‘Very Fragile’

“We wouldn’t be surprise to see a quick drop in euro,” Harajli said. “The markets are showing a lot of patience, but it’s very fragile.”

The BOJ under said yesterday it will buy 13 trillion yen ($146.6 billion) in assets a month starting in 2014 in addition to increasing its inflation target.

“Adopting the 2 percent target was a relatively bold move, but they need to implement more credible policy to convince the market,” Lee Hardman, a currency strategist at Bank of Tokyo- Mitsubishi UFJ Ltd. in London, said of the BOJ. “What will be important for yen direction will be how the market assesses the effectiveness of their policy to meet that target.”

Japan’s consumer prices excluding fresh food fell 0.2 percent in December from a year earlier, following a 0.1 percent drop the previous month, according to the median of 23 estimates in a Bloomberg News survey before the data due on Jan. 25. That would be the biggest decline since August.

The BOJ forecast inflation will accelerate to 0.9 percent in the fiscal year starting April 2014.

Biggest Decline

The yen fell 5.4 percent in the past month, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 1.4 percent and the dollar was little changed.

Japan’s top currency official pushed back against international criticism of the nation’s monetary policy, saying that the central bank isn’t engaged in a competitive devaluation of the yen.

“The BOJ’s monetary policy, decided yesterday, is aimed at ending persistent deflation, so criticism that it’s a form of competitive devaluation is misplaced,” Vice Finance Minister Takehiko Nakao said in an interview in Tokyo today. “Recent developments toward a weaker yen reflect the yen’s correction phase from one-sided and excessive gains until last year.”

Won Weakens

The won, Asia’s best-performing currency of 2012, fell toward this month’s low after Finance Minister Bahk Jae Wan vowed to curb volatility, saying recent gains were excessive.

The government is “all ready” for new measures, Bahk told reporters in Seoul, declining to comment on when they will be announced. The currency touched 1,054.49 on Jan. 15, a level not seen since August 2011, after rallying 8.3 percent last year.

The won fell 0.4 percent to close at 1,066.18 per dollar in Seoul, according to data compiled by Bloomberg. It touched this month’s low of 1,067.77 yesterday.

South Africa’s rand weakened against all of its 16 most- traded counterparts as rising inflation added to concern about slowing growth amid labor protests and civil unrest in Africa’s biggest economy.

The consumer price index accelerated to 5.7 percent in December, compared with 5.6 percent in November, Statistics South Africa said.

The rand depreciated 1.4 percent to 8.9781 per dollar, snapping two days of gains.

‘Currency Wars’

The global economy faces potential “currency wars” unless countries set aside the view that lower exchange rates are needed to stimulate their economies and accept the need to rebalance domestic demand toward trade surplus countries, Bank of England Governor Mervyn King said in Belfast yesterday.

“The existing configuration of exchange rates is unlikely to deliver stability,” he said. “For almost two decades the world has struggled with, but failed to resolve, this problem. So it is hard to be optimistic about how easy it will be to manage the resulting tensions.”

Chile is “concerned about the appreciation of the currency” amid easing policies in the U.S., Japan recently, and the EU, Finance Minister Felipe Larrain said in an interview with Francine Lacqua on Bloomberg Television’s “Countdown” on the sidelines of the World Economic Forum in Davos, Switzerland.

To contact the reporters on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net; Lukanyo Mnyanda in Edinburgh News at lmnyanda@bloomberg.net

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

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