Yen Set for 11th Weekly Drop as CPI Adds to Easing Case

The yen headed for a record stretch of weekly losses against the dollar as data showing a decline in Japanese consumer prices added to the case for further monetary stimulus from the central bank.

The Bank of Japan announced open-ended easing and a 2 percent inflation target this week. The Japanese currency remained weaker after touching a 2 1/2-year low as Governor Masaaki Shirakawa said he will make “considerable efforts” to reach the price target. The Dollar Index rose before U.S. data forecast to show home sales increased.

“The market’s looking for any excuse to sell the yen at the moment,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk management company. “The weakness in the yen has got quite a long way to go. It’s very hard to find economic fundamentals that justify buying the currency.”

The Japanese currency slid 0.2 percent to 90.55 per dollar at 6:39 a.m. in London from yesterday, after earlier touching 90.69, the weakest since June 21, 2010. It was set for an 11th weekly loss, the longest losing streak in data compiled by Bloomberg going back to 1971.

The yen dropped to 121.31 per euro, the weakest since April 2011, before trading at 121.03, 0.2 percent lower than yesterday’s close in New York. The 17-nation euro fell 0.1 percent to $1.3367. The shared currency was still poised for a 0.4 percent weekly gain against the dollar and 0.9 percent advance versus the yen.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, added 0.1 percent to 80.038.

Consumer Prices

Japanese consumer prices excluding fresh food fell 0.2 percent in December from a year earlier, the statistics bureau reported in Tokyo today, the seventh decline in eight months.

Prime Minister Shinzo Abe, who took office last month, has called for “bold monetary policy” to beat deflation and drive the yen lower. The BOJ on Jan. 22 doubled its inflation target to 2 percent and announced open-ended asset buying from 2014.

BOJ board members said Japan’s economy is weakening and the central bank will continue with “powerful” monetary easing, according to the minutes released today of the December meeting when it expanded its asset-purchase program by 10 trillion yen ($110 billion).

Shirakawa reiterated in remarks in Tokyo today that while the central bank is conducting aggressive easing, achieving the price-gain target isn’t easy.

100 Yen

Deputy Economy Minister Yasutoshi Nishimura said yesterday the currency’s decline isn’t over and a level of 100 versus the U.S. dollar wouldn’t be a concern. The yen at 100 per dollar would be acceptable, he said in an interview in Tokyo, suggesting global criticism may fail to convince Abe to temper his push to weaken the currency. German Chancellor Angela Merkel said yesterday in Davos, Switzerland, that the Japanese government’s call for monetary easing is a risk to the global economic recovery.

The dollar was supported before a report which may show home sales in the U.S. increased. Purchases of new houses probably climbed to a 385,000 annual rate in December, according to the median estimate of economists in a Bloomberg News survey, which would be the best showing since April 2010. The National Association of Realtors releases the data today.

German Economy

Losses in the euro were limited before data forecast to show a rise in business confidence in Germany, Europe’s largest economy. Economists polled by Bloomberg expect the Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 103 this month from 102.4 last month. That would be the highest since July.

“The real euro-zone economy is still quite soft, although we are seeing indicators out of Germany starting to rebound,” said Peter Dragicevich, a Sydney-based currency economist at Commonwealth Bank of Australia, the nation’s largest lender. “We think the Ifo data due today probably should continue to improve, and that will help support the euro.”

Billionaire investor George Soros said the euro is here to stay and will probably strengthen. The momentum is for the “euro to rise and yen to fall,” Soros said at the World Economic Forum in Davos yesterday.

Morgan Stanley recommends selling the yen versus the euro, the U.S. dollar and Asian currencies, according to a report yesterday.

The yen has fallen 6.8 percent in the past month, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 1.8 percent in the same period while the dollar added 0.3 percent.

The yen’s 14-day relative-strength index against the dollar was at 31, near the 30 level which indicate asset price has fallen too rapidly and it may be poised to reverse course. The Japanese currency’s RSI versus the euro was also at 31.

“The pace of yen weakening is likely to slow,” said Kikuko Takeda, a senior currency economist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “I don’t think it will continue to depreciate at the same pace as it has been in the past month. We may see a bit of a rebound sooner or later.”

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