Yen Weakens as Fund Advised to Trim Local Bonds; Krone Slides

The yen weakened for the first time in four days against the dollar after the head of an advisory panel called on Japan’s Government Pension Investment Fund to start cutting domestic debt holdings.

Japan’s currency dropped versus all except three of its 16 major peers as advisory group chairman Takatoshi Ito said the 124 trillion yen ($1.21 trillion) fund should trim local bonds immediately to its lower limit of 52 percent of assets. The dollar was little changed as investors weighed whether payroll data today will spur the Federal Reserve to reduce stimulus. Economists predict U.S. employers added 185,000 jobs last month. Australia’s dollar slid for a seventh week. Norway’s krone fell.

“The decision about downgrading the bond holdings is supportive of dollar-yen in this environment,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “But this is largely a sideshow before the main event of the jobs report. Something north of 200,000 is needed to get the dollar higher.”

The yen fell 0.3 percent to 102.14 per dollar at 7:16 a.m. in New York after advancing 1.1 percent in the previous three days. Japan’s currency dropped 0.4 percent to 139.70 per euro after depreciating to 140.03 on Dec. 3, the weakest since October 2008. The dollar was little changed at $1.3676 per euro.

Higher Returns

The yen declined for the first time in four days against the euro after Ito said the GPIF should seek higher returns away from local bonds. The fund’s portfolio was 58 percent comprised of Japanese debt as of Sept. 30, according to the latest quarterly report on its website.

“The Ministry of Health has given an OK to everything that was said in the report,” Ito said in an interview in Tokyo. “GPIF needs to start reducing bonds as soon as possible to its lower limit of 52 percent.”

The yen has tumbled 14 percent this year, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro climbed 8 percent and the dollar gained 3.7 percent.

The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major counterparts, was little changed at 1,017.76 after dropping to 1,016.91 yesterday, the lowest since Nov. 20.

The U.S. jobless rate dropped to 7.2 percent last month, matching an almost five-year low, from 7.3 percent in October, according to a Bloomberg survey before today’s report.

Minutes of the Fed’s Oct. 29-30 meeting released on Nov. 20 showed policy makers expected economic data to “warrant trimming the pace of purchases” in the near future from the current $85 billion of bonds each month. Policy makers next meet on Dec. 17-18.

Quicker Growth

U.S. gross domestic product climbed at a 3.6 percent annualized rate in the third quarter, up from an initial estimate of 2.8 percent and the strongest since the first quarter of 2012, the Commerce Department said yesterday.

“Strong numbers again coming out of the U.S. puts further weight on talks of a December taper,” Gary Yau, a research associate at Credit Agricole CIB in Hong Kong, wrote in a note to clients. “We continue to see a mood of caution and consolidation ahead of the all-important U.S. jobs report.”

Australia’s dollar was set to match its longest weekly losing streak in almost 30 years after a Dec. 4 report showed the South Pacific nation’s economic growth slowed last quarter.

Australia’s currency has dropped 0.4 percent this week to 90.72 U.S. cents. It was little changed today. The last time the currency declined for longer than seven weeks was in the period ended March 1985.

Norway’s krone slipped for a third day against the euro after the central bank yesterday kept interest rates unchanged and said it will delay plans to raise borrowing costs until the summer of 2015.

Norway’s currency declined 0.3 percent to 8.4390 per euro after sliding to 8.4460, the least since December 2009. The krone dropped 0.3 percent to 6.1725 per dollar.

To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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