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Yen Jumps Most in Almost 2 Years as Aso Says Drop Was Too Fast

Feb. 8 (Bloomberg) -- The yen jumped the most in almost two years against the dollar after Japanese Finance Minister Taro Aso said the pace of its recent slide has been too rapid.

Japan’s currency rose for a second day versus the greenback as Aso told parliament the government hadn’t anticipated a sudden move to around 90 per dollar. The euro fell against the yen and dollar after European Central Bank President Mario Draghi signaled yesterday that further interest-rate cuts in the region remain a possibility. The pound rose for a third day against the euro amid bets the Bank of England will refrain from extending its stimulus program in contrast to its European counterpart.

“Japan is now thinking about what the world thinks about them,” Douglas Borthwick, a managing director and head of foreign exchange at Chapdelaine FX in New York, said in a telephone interview. “They’re happy with it between 90 to 95, and the market is slowly understanding that.”

The yen strengthened 1 percent to 92.68 per dollar at 4:49 p.m. New York time after appreciating 1.6 percent, the biggest gain since March 17, 2011. The currency gained 1.2 percent to 123.95 per euro after depreciating to 127.71 on Feb. 6, the weakest since April 2010. The euro fell 0.2 percent to $1.3370.

Hedge funds and other large speculators increased their bets that the euro will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers on an advance in the euro compared with those on a drop -- so-called net longs -- was 37,952 on Feb. 5, compared with 27,472 a week earlier.

Net-wagers the yen will fall against the dollar decreased, pushing net-shorts to 68,413.

Bolivar, Won

Venezuela will devalue its currency by 32 percent to 6.32 bolivars per dollar, Finance Minister Jorge Giordani said today on state television. The bolivar has fallen more than 35 percent to 18.41 bolivars per dollar on the black market since President Hugo Chavez’s re-election in October, according to Lechuga Verde, a website that tracks the rate.

South Korea’s won declined versus all 16 of its most-traded counterparts after the European Central Bank said yesterday the euro’s strength could hamper an economic recovery, deterring risk-taking. The won fell 0.7 percent to 1,095,80 per dollar after slipping to 1,097.11, its lowest level in a week.

The British pound rose the most in two years this week after future Bank of England Governor Mark Carney said yesterday that current monetary policy may be enough to help the economy. Sterling gained 0.8 percent to 84.59 pence per euro after earlier rising to 84.48. The currency appreciated 0.5 percent to $1.5801.

Rate Cuts

Japan’s currency has tumbled 18 percent in the past six months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, in anticipation of the greater monetary stimulus advocated by Shinzo Abe, who became prime minister in December.

The yen’s decline has spurred criticism abroad, with Aso’s South Korean counterpart complaining about the risk to his nation’s exports and Russia last month warning about the potential for reciprocal action to drive down exchange rates. Finance ministers and central-bank governors from the Group of 20 nations are scheduled to meet in Moscow next week.

“The market is very attuned to the idea that the government wants a weaker yen,” Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc in Stamford, Connecticut, said in a telephone interview. “If there’s a sign the attitude is changing, particularly about the pace of weakening, that gives the market a little bit of pause.”

Draghi’s View

The yen gained for a third day versus the euro after Draghi suggested yesterday the recent appreciation of the 17-nation currency may damp inflation, a signal that further interest-rate cuts remain a possibility.

Draghi’s comments yesterday came after the euro surged to a 2 1/2-year high against the yen two days ago amid signs the European debt crisis was easing.

“It’s unlikely there’s going to be a concerted effort to talk the euro down compared to the yen and the dollar,” Adrian Lee, chief investment officer at currency manager Adrian Lee & Partners in Dublin, which manages more than $5 billion, said in a Bloomberg Television interview. “The euro, of the Group of 3, is the place to put your money.”

The euro may strengthen to $1.45 in the next six months, Lee said.

Currency volatility will probably increase this year as volumes increase, Citigroup Inc. said, citing trading platform and central bank figures.

Combined average daily volume on currency trading platforms by CME Group Inc., Thomson Reuters Corp. and ICAP Plc was $381 billion last month, up from $290 billion in December and $339 billion a year earlier, according to data compiled by Greg Anderson, Citigroup’s North American head of Group of 10 currency in New York.

To contact the reporters on this story: Joseph Ciolli in New York at jciolli@bloomberg.net; Taylor Tepper in New York at ttepper2@bloomberg.net

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

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