Yen Rallies Most in 7 Weeks on Speculation Decline Too Steep

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The yen rose the most in seven weeks versus the dollar on speculation the currency’s decline has gone too far, too fast with a report showing Japan’s current-account surplus was twice what economists forecast.

The Japanese currency strengthened against all of its 31 major counterparts. A gauge of the dollar slipped following the biggest weekly rally in more than a year. Emerging-market currencies slumped, led by South Africa’s rand and Russia’s ruble, after Chinese imports unexpectedly fell in November.

“What we’re seeing here today in terms of a slight pullback in the yen and getting back to the 120 level is probably not surprising,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co., said in a phone interview from New York. “There’s no particular reason for the yen’s trend in the medium term to reverse.”

The Japanese currency gained 0.6 percent to 120.69 against the dollar as of 5 p.m. New York time after adding as much as 1 percent, the biggest rally since Oct. 15. It slumped 2.4 percent last week, a seventh straight weekly drop that has it down 11 percent since Oct. 17. The yen gained 0.4 percent to 148.65 per euro, and the common currency added 0.3 percent to $1.2317.

Even with today’s advance, the yen’s 14-day relative-strength index versus the dollar was at 25, below the 30 level that some traders see as a signal an asset may have declined too far, too fast and is due to reverse course. It has been below that level every day since Oct. 31.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 trading partners, fell 0.2 percent to 1,120.47. It closed on Dec. 5 at 1,122.34, the highest since March 2009.

China Imports

Emerging-market currencies dropped as China’s imports fell 6.7 percent, the customs administration said, compared with the median estimate among economists surveyed by Bloomberg News for a gain of 3.8 percent increase. Exports rose 4.7 percent from a year earlier, less than the forecast for growth of 8 percent.

An index tracking 20 key exchange rates in developing economies has fallen to levels last seen more than a decade ago, down 10 percent this year in what would be the biggest annual slide since 2008.

“The imports data shows China’s domestic demand is still quite weak,” Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York. “U.S. data has been improving, but no signs growth is picking up in the EM space.”

The rand fell to a six-year low against the dollar after South Africa’s current-account deficit narrowed less than economists expected. The currency slid 1.7 percent to 11.5409 per dollar after reaching 11.5752, the weakest since October 2008.

Plunging Ruble

The ruble’s drop of 39 percent this year trails only the Ukrainian hryvnia’s 47 percent decline among global currencies as plummeting crude prices have exacerbated the impact of international sanctions on Russia linked to the Ukraine conflict. The ruble depreciated 2.4 percent to 53.7470 per dollar today.

Malaysia’s ringgit slid 0.7 percent to 3.4955 per dollar, the Indonesian rupiah weakened 0.4 percent to 12,348 and the South Korean won dropped 0.3 percent to close in Seoul at 1,117.57 per dollar.

The yen gained as Japan’s current-account surplus was at 833.4 billion yen ($6.9 billion) in October, beating the median estimate of 370.1 billion yen in a Bloomberg survey.

‘Profit-Taking’

“We’re seeing a lot of positions squaring and profit-taking -- that’s what’s happening in dollar-yen,” said Sireen Harajli, a Mizuho Bank Ltd. strategist in New York. “A big part of it is dollar-yen has moved up so much. We’re seeing some short-term retracement.”

Japanese voters go to the polls Dec. 14 in an election Prime Minister Shinzo Abe is forecast to win handily, giving him a new mandate to cure the country’s economic ills.

Federal Reserve officials meet next week to debate when to implement their first interest-rate increase since 2006.

The dollar surged 0.9 percent Dec. 5 after the Labor Department said U.S. employers added 321,000 jobs in November, exceeding the highest projection in a Bloomberg survey. Economists predict a Commerce Department report on Dec. 11 will show retail sales climbed 0.4 percent in November.

The yen slumped 7.2 percent in the past three months, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The U.S. dollar jumped 7 percent, the most among gainers, and the euro added 1.3 percent.

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