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Dollar Approaches Postwar Low Versus Yen Before U.S. Budget Vote

Japanese 10000 Yen Notes
A woman arranges Japanese 10000 yen notes for a photograph in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

The dollar dropped toward a postwar low against the yen and touched a record low against the Swiss franc as the U.S. House of Representatives prepared to vote on a debt-limit plan that faces opposition in the Senate.

Japan’s currency rose against all of its major counterparts on demand for a refuge after Economy Minister Kaoru Yosano indicated intervention to weaken the yen was unlikely before the outcome of the U.S. deficit debate. The euro declined versus the dollar as European economic confidence fell this month more than forecast and Standard & Poor’s cut Greece’s credit rating yesterday, saying the nation will partially default.

“I’m not betting on the dollar because of all the uncertainty,” said Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York. “There are so many scenarios and possible outcomes. The safe havens continue to be attractive.”

The dollar dropped 0.4 percent to 77.67 yen at 5 p.m. in New York, from 77.98 yesterday, when it fell to 77.57, the weakest since hitting a post-World War II low of 76.25 on March 17. The dollar was little changed at 80.12 Swiss centimes after touching a record low 79.90. The euro slid 0.2 percent to $1.4334 and decreased 0.6 percent to 111.34 yen.

The S&P 500 Index dropped 0.3 percent. The yield on 10-year Treasury notes fell 0.04 percentage point to 2.95 percent. Crude oil for September delivery fell 2.2 percent to $97.40 a barrel.

Weak Real, Strong Lira

Brazil’s real had its biggest two-day decline against the dollar since May, falling 0.8 percent to 1.5555 versus the dollar today. It tumbled yesterday after the government said it will levy a 1 percent tax on some net short dollar positions by investors in the country’s futures market. A short is a bet a currency will decline.

Turkey’s lira, the world’s worst performing currency against the dollar in July, strengthened the most in a month after central-bank chief Erdem Basci indicated he’s ready to take steps to halt the currency’s retreat.

The lira gained as much as 1.3 percent to 1.6692 per dollar after Basci said at a news conference in Ankara the currency is “definitely not overvalued” and that the bank has the instruments to prevent further declines. Turkey’s currency has lost 3.2 percent against the dollar this month.

Sweden’s krona rallied as a report showed the nation’s retail sales topped estimates. The krona appreciated 0.4 percent to 6.3224 against the dollar.

The dollar has fallen 1.8 percent over the past month, according to Bloomberg Correlation-Weighted Indexes, which track the greenback against nine developed-nation currencies. The euro has slumped 2.6 percent and the yen has gained 2.5 percent.

House Vote

The House of Representatives plans to vote at about 6 p.m. Washington time on a debt-ceiling increase that faces unified Democratic opposition in the Senate.

The euro weakened versus the dollar as the European Commission reported that an index of executive and consumer sentiment in the currency region fell to 103.2 this month from a revised 105.4 in June. That’s the lowest since August 2010.

Greece will partially default on its debt once European officials push through a plan that will see bondholders foot part of the bill of a second bailout agreed to last week in Brussels, S&P said yesterday. Its cut in Greece’s rating followed a downgrade by Moody’s Investors Service on July 25.

The yen remained higher versus the euro and dollar after Jiji Press reported that Economy Minister Yosano indicated to a prefectural governor that he was waiting for the outcome of the U.S. debt debate. The governor had come to Tokyo to ask for action on the yen and relayed Yosano’s remarks to reporters after the meeting, Jiji said.

Group of Seven nations jointly sold the yen on March 18 after it surged to a record 76.25 to the dollar on the previous day, saying in a statement they wanted to reduce “excess volatility and disorderly movements.”

Volatility implied by one-month dollar-yen options increased to 10.21 percent today after reaching a two-month high on July 14.

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