Yen Depreciates to Six-Month Low on Iran Nuclear Accord

Japanese Yen
The yen has weakened 13 percent this year against a basket of nine developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, the biggest decline within the group. The dollar has risen 3.8 percent, while the euro has advanced 6.8 percent. Photographer: Akio Kon/Bloomberg

The yen slid to the weakest level in almost six months versus the dollar as demand for the safety of the currency waned after an accord was struck to set limits on Iran’s nuclear program.

Japan’s currency depreciated to a four-year low against the euro before a report this week economists said will show inflation accelerated in October. The shared European currency declined versus the dollar after a policy maker said the European Central Bank is technically prepared to make its deposit rate negative. The greenback advanced against the majority of 16 major peers. Thailand’s baht dropped to an 11-week low amid anti-government protests.

“The risk-on environment, along with the nuclear pact signed by Iran, has certainly taken the pressure off haven currencies like the yen,” Ravi Bharadwaj, a Boston-based senior market analyst at Western Union Business Solutions, a unit of Western Union Co., said in a phone interview. “The ECB in recent days have talked up the possibility of cutting rates to boost growth in the union.”

The yen fell 0.4 percent to 101.67 per dollar at 5 p.m. New York time after reaching 101.92, the weakest since May 29. It slid 0.1 percent to 137.43 per euro after touching 137.99, the weakest since October 2009. The dollar added 0.3 percent to $1.3517 against Europe’s shared currency.

The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major counterparts, rose 0.2 percent to 1,020.95.

Baht, Rupee

Protests in Thailand spread to military bases, government offices and television stations today after more than 100,000 people joined rallies yesterday against Prime Minister Yingluck Shinawatra. Global funds pulled a net $2.1 billion from Thai bonds and equities this month through Nov. 22, official data show.

“Investors want to stay away from Thailand amid concern the protests will intensify or lead to violence,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Bank Ltd. in Tokyo. “The political concern encouraged investors to take some money out from Thailand.”

The baht fell 0.7 percent to 32.04 per dollar after touching 32.08, the weakest level since Sept. 11.

India’s rupee rose the most among emerging-market currencies on optimism a drop in oil costs after Iran’s nuclear pact will help shrink the South Asian nation’s current-account deficit.

Iran agreed to curtail its nuclear activities and in return won an easing of “certain sanctions” on oil, auto parts, gold and precious metals. The deal, which is reversible, was announced yesterday after five days of talks in Geneva.

‘Positive Impact’

“The Iran deal is a huge boost as our oil costs will come down,” said Vikas Babu, a trader at Andhra Bank in Mumbai. “The swap-window extension will have a limited, but positive impact on the exchange rate.”

The rupee gained for a second day, adding 0.6 percent to 62.4950 per dollar.

Japan’s statistics bureau will say on Nov. 29 the nation’s consumer prices excluding fresh food rose 0.9 percent last month from a year earlier, according to the median estimate of economists surveyed by Bloomberg News. Deflation is coming to an end and the nation’s economy is recovering as expected, Mitsuhiro Furusawa, vice minister of finance for international affairs said today.

The Bank of Japan said in April it wanted to achieve 2 percent inflation in about two years. Governor Haruhiko Kuroda said today the bank’s target could be hit sometime late in the fiscal year through 2014 or early in the 2015 period.

Inflation Target

“This week, we will probably see another tick up in the CPI data out of Japan,” Steven Saywell, global head of foreign-exchange strategy at BNP Paribas SA in London, said in an interview on Bloomberg Television’s “On the Move” with Manus Cranny. “The BOJ is very much focused on reaching the inflation target and what that means is that the yen continues to weaken.”

The yen lost 13 percent this year, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 4 percent and the euro advanced 6.8 percent.

The euro declined after the ECB’s Ardo Hansson said in an interview in Tallinn on Nov. 22 that the Frankfurt-based central bank’s “options on rate cuts are still not fully exhausted and there are all kinds of other measures that are still on the table.” Hansson heads Estonia’s central bank.

Options Trading

Trading in over-the-counter foreign-exchange options totaled $45 billion, from $47 billion on Nov. 22, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $18 billion, the largest share of trades at 40 percent. Options on the euro-dollar rate totaled $5.8 billion, or 13 percent.

Dollar-yen options trading was 65 percent more than the average for the past five Mondays at a similar time in the day, according to Bloomberg analysis. Euro-greenback options trading was 22 percent below average.

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