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Yen Snaps 3-Day Rally as Japan’s Current-Account Deficit Widens

The yen fell the most in four weeks versus its U.S. peer after a government report showed Japan’s current-account deficit widened to a record in November.

The dollar gained for the first time in four days as U.S. retail sales rose more than forecast in December, giving the world’s biggest economy a lift at the end of 2013. The Swedish krona strengthened as a report showed inflation was faster in December than economists forecast. South Africa’s rand slid to a five-year low against the dollar on speculation labor disputes at platinum producers will reduce exports.

“Dollar-yen is a bet everyone wants to be long on -- investors are buying on a dip because of the Japanese data,” said Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA, by phone from New York. A long position is a bet an asset, in this case the dollar, will appreciate. “The retail sales report makes the payroll numbers look more one-off instead of the economy looking to be on a soft patch.”

The yen fell 1.2 percent to 104.22 per dollar at 5 p.m. in New York after plunging as much as 1.3 percent, the biggest drop since Dec. 18. Japan’s currency slid 1.2 percent to 142.56 per euro after appreciating to 140.50 yesterday, the strongest since Dec. 6. The dollar closed at $1.3679 per euro.

The Bloomberg Dollar Spot Index rose 0.4 percent to 1,025.22 after falling 0.7 percent during the previous three days. The gauge slid 0.4 percent on Jan. 10 when a government report showed U.S. employers added fewer workers in December than economists forecast.

Krona, Rand

The krona jumped to a two-month high against the euro after Statistics Sweden said consumer prices rose 0.1 percent in December from a year earlier. Economists surveyed by Bloomberg predicted a 0.1 percent drop.

The Swedish currency advanced 1 percent to 8.8022 per euro after appreciating to 8.7954, the strongest since Nov. 12. The krona gained 1.1 percent to 6.4347 per dollar.

The rand declined as Statistics South Africa said growth in mining output slowed to 5.1 percent in November from a revised 23 percent the previous month. The most powerful labor group at the South Africa’s platinum mines, the Association of Mineworkers and Construction Union, plans meetings with its members this week to discuss striking over pay.

The rand traded fell 0.1 percent to 10.8338 per dollar after sliding to 10.8952, the weakest level since October 2008.

Canada’s dollar fell to a four-year low amid speculation the Bank of Canada may signal an interest-rate cut after reports last week showed payrolls declined and the trade deficit swelled. The central bank meets Jan. 22.

The loonie dropped 0.8 percent to C$1.0946 per dollar and reached C$1.0959, the weakest since October 2009. It has fallen 3 percent versus the greenback this year, the most among 16 major currencies after the rand’s 3.2 percent slide.

Retail Sales

The dollar strengthened as U.S. retail purchases increased

0.2 percent after a 0.4 percent advance in November that was smaller than previously reported, Commerce Department figures showed today in Washington. The median forecast of 86 economists surveyed by Bloomberg called for a 0.1 percent gain. Excluding cars, demand jumped by the most in almost a year.

“The retail-sales number isn’t very good, but the market doesn’t seem too bothered by that,” Fabian Eliasson, head of U.S. currency sales in New York at Mizuho Financial Group Inc., said in a phone interview. “We should keep an eye on Japan’s current account. If you look at the market, it is fairly positioned for short dollar-yen as of last night, it seems like it’s picking up a bit of a bottom here.”

Japan Shortfall

Japan posted a record 592.8 billion yen ($5.7 billion) shortfall in its current account, the Ministry of Finance said in Tokyo, larger than the median forecast of 368.9 billion yen in a Bloomberg News survey of 24 economists. The deficit is the biggest in comparable data back to 1985.

The yen tends to strengthen during periods of financial turmoil because the nation has had an annual current-account surplus since at least 1985, making it less reliant on foreign capital.

“It’s a continuation of data out of Japan, supporting dollar-yen higher,” Dan Dorrow, the head of research at Faros Trading LLC in Stamford, Connecticut, said in a phone interview. “The current-account deficit remains, that’s an underlying yen-negative flow.”

Money managers in Japan bought a net 1.48 trillion yen of dollar bonds in November, separate data from the Finance Ministry showed. The five-month stretch of net purchases was the longest since the period ended October 2010.

Treasury 10-year notes yielded 2.21 percentage points more than similar-maturity Japanese bonds, approaching the 2.30 percentage-point spread on Dec. 24 that was the widest since February 2011 based on closing prices.

The yen has tumbled 13 percent in the past year, the worst performer after Australia’s dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 3.9 percent and the euro strengthened 7 percent.

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