Yen Falls for 11th Week on Bets Japan Will Push It Down Further

The yen slid against the dollar in the longest weekly losing streak on record as investors who bet on bold action from the Bank of Japan (8301) were encouraged by officials suggesting the currency has further to fall.

The euro rose to an 11-month high versus the dollar as the European Central Bank said lenders will hand back a greater amount of three-year loans next week than forecast. The yen fell for an 11th week as Deputy Economy Minister Yasutoshi Nishimura said its drop isn’t over and a 100-per-dollar level wouldn’t be a concern. The Federal Reserve opens a two-day meeting Jan. 29.

“The BOJ is the whole story there,” Fabian Eliasson, vice president of corporate foreign-exchange sales at Mizuho Financial Group Inc. in New York, said in a telephone interview. “This latest comment coming out that the 100 level is where they think is a good level for it to be is what’s pushing this last move.”

The yen slid 0.9 percent to 90.91 per dollar this week in New York trading. It touched 91.19, the weakest level since June 2010. The yen has never previously lost for 11 straight weeks, according to records compiled by Bloomberg dating to 1971. Japan’s currency tumbled 2 percent against the euro to 122.32. It was the seventh weekly loss, the longest run since July 2008.

The euro gained 1.1 percent to $1.3464 and touched $1.3474, the strongest level since Feb. 29.

Net Shorts

Futures traders decreased bets for a sixth straight week that the yen will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- so-called net shorts -- was 64,068 on Jan. 22, compared with net shorts of 65,727 a week earlier.

Traders increased bets the euro will gain against the dollar, known as net longs, to 21,381, the most since July 2011, from 7,315 the week before, CFTC data show.

Canada’s dollar and South Africa’s rand slid versus most of the U.S. dollar’s 16 most-traded counterparts.

The Canadian currency fell after the Bank of Canada said the need to raise interest rates is less urgent as the economy will take longer to reach full output. The loonie, as the currency is nicknamed for the image of the bird on the C$1 coin, sank 1.4 percent to C$1.0058 per U.S. dollar.

Rand Drops

The South African currency fell Jan. 24 to 9.0878 to the greenback, the weakest level in almost four years. Credit Suisse Group AG reduced its three-month forecast for the currency to 9.2 per U.S. dollar from 8.7, citing the risk of social and political instability from consolidation in the mining sector.

The rand ended the week down 0.7 percent to 8.9446 to the U.S. currency.

Norway’s krone was the biggest winner against the greenback, advancing 1.4 percent to 5.5222 per dollar.

The euro gained as the ECB said 278 banks will repay 137.2 billion euros ($184.4 billion) next week, versus an 84 billion- euro forecast in a Bloomberg survey.

Europe’s central bank flooded financial markets a year ago with two tranches of Longer-Term Refinancing Operations, or LTRO, totaling more than 1 trillion euros after banks stopped lending to each other due to the sovereign-debt crisis.

“The repayment is much higher than the market expected, and it’s positive for the euro,” Roberto Mialich, a senior currency strategist at UniCredit SpA in Milan, said yesterday. “Banks, which were part of the euro problem, are willing and able to make repayment to the ECB, and this will provide further upward momentum.”

‘Key Driver’

The difference between rates on two-year interest-rate swaps denominated in euros and comparable swaps in dollars widened yesterday to 24 basis points, or 0.24 percentage point, the most since July, from 16 basis points on Jan. 24. The euro rate was 0.42 percent, and the dollar rate was 0.66 percent.

“A key driver of any currency is the two-year interest rate,” Dan Dorrow, head of research in Stamford, Connecticut, at Faros Trading LLC, said in a telephone interview. The LTRO repayments show “banks are able to fund themselves,” he said.

The yen fell 7.4 percent in the past month, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 2.5 percent, and the dollar was little changed.

The Japanese currency rallied as much as 1.4 percent on Jan. 22, the biggest intraday jump since May, after the BOJ raised its inflation target to 2 percent and said it will conduct open-ended asset purchases starting in January 2014. The date disappointed investors who expected bolder action sooner.

‘New Ground’

“They have broken new ground by raising inflation,” Shahab Jalinoos, a senior currency strategist at UBS AG in Stamford, Connecticut, said Jan. 22 in a telephone interview. “The problem is that the actual measures they’re using to reach those targets appear too weak to actually have the effect on inflation that the target would require.”

The yen reversed gains Jan. 24 after Deputy Economy Minister Nishimura said in an interview in Tokyo the current level of about 90 yen per dollar “can be said to be a correction of the strong yen, but it isn’t over yet.”

Japanese Prime Minister Shinzo Abe has pressed since his election last month to steer monetary policy to jumpstart an economy in which prices haven’t risen since 2008. He has a chance to reshape the nation’s central bank with the end of BOJ Governor Masaaki Shirakawa’s five-year term in April.

The U.S. central bank will issue a policy statement after its meeting ends on Jan. 30.

To contact the reporter on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net

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

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