Yen Touches Lowest Since 2010 Amid Bets on BOJ Easing

The yen touched the weakest level versus the dollar since June 2010 on bets Japanese Prime Minister Shinzo Abe will select a central-bank chief who will expand monetary easing, accelerating the currency’s decline.

Japan’s currency slid beyond 120 per euro for the first time since May 2011 after Abe, whose government said last week it will increase stimulus spending, said he wanted someone “who can push through bold monetary policy” as the next Bank of Japan governor. The BOJ meets next week. The euro reached its highest in 10 months versus the greenback. It remained stronger as Federal Reserve Chairman Ben S. Bernanke said the central bank is monitoring the effects of its monetary stimulus.

“The changes that have been proposed by the Japanese government over the last couple of weeks are pretty significant and have been working against the yen,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford Connecticut, said in an telephone interview. “The news today is in line with everything we’ve heard before. People are just buying the talk.”

The yen declined 0.3 percent to 89.48 per dollar at 5 p.m. New York time and reached 89.67, the weakest level since June 25, 2010. Japan’s currency fell 0.6 percent to 119.74 per euro and reached 120.13, a level not seen since May 4, 2011. The dollar depreciated 0.3 percent to $1.3382 per euro. It reached $1.3404 earlier, the weakest level since Feb. 29, before briefly erasing losses.

Japanese financial markets were shut today for a holiday.

Kiwi, Pound

The New Zealand dollar, nicknamed the kiwi, climbed against all of its 16 most-traded counterparts after a report showed retail spending on credit cards rose. The currency advanced 0.8 percent to 84.32 U.S. cents and gained 1.2 percent to 75.44 yen.

The Swiss franc dropped as European leaders said the worst is probably over for the region’s sovereign-debt crisis. Investors used the currency as a haven amid the financial turmoil. The franc slid 1.3 percent to 1.2340 per euro and touched 1.2341, its weakest level since December 2011.

Sterling fell for a seventh day versus the euro, the longest losing streak since October. The pound fell 0.6 percent to 83.24 pence per euro and declined 0.3 percent to $1.6078.

The kiwi rose 2.3 percent over the past year versus nine developed-nation peers monitored by the Bloomberg Correlation-Weighted Indexes. The pound added 1.1 percent, while the dollar fell 4.2 percent and the yen lost 19 percent.

The Japanese government said last week it will spend 10.3 trillion yen ($116 billion) in new stimulus efforts.

U.S. Treasuries

Abe also may become the best friend of investors in U.S. Treasuries if he buys U.S. government bonds to weaken the yen and boost his nation’s slowing economy.

The prime minister’s Liberal Democratic Party pledged to consider a fund to buy foreign securities that may amount to 50 trillion yen ($558 billion) according to Nomura Securities Co. and Kazumasa Iwata, a former Bank of Japan deputy governor. JPMorgan Securities Japan Co. says the total may be double that.

The next BOJ governor must be a “bold policy leader,” Abe said yesterday on public broadcaster NHK’s “Sunday Debate” program. Governor Masaaki Shirakawa will step down in April.

The central bank will review its 1 percent inflation goal at a Jan. 21-22 meeting. Abe has demanded it double the target.

Jeffrey Shen, managing director in San Francisco at BlackRock Inc., said that “in the short run, we’re going to see the yen weaken significantly more.” Shen spoke in an interview on Bloomberg Radio’s “Bloomberg Surveillance” with Tom Keene and Michael McKee.

The yen lost 11 percent against the dollar in 2012, the most in seven years. The currency is still stronger than its 10-year average of about 101, hurting the competitiveness of Japanese exporters.

‘Haywire’ Markets

The dollar weakened versus the euro for a third day as President Barack Obama warned Congress not to use the nation’s debt ceiling as leverage in the U.S. budget debate.

Obama said at a White House press conference markets may go “haywire” if the U.S. debt ceiling isn’t raised. The nation must pay its bills, he said. The U.S. reached the statutory limit of $16.4 trillion Dec. 31, and the Treasury began using what it termed extraordinary measures to finance the government.

Bernanke said the benefits of the Fed’s purchases of securities under the quantitative easing strategy may vary through time and the central bank is continuing to monitor the impact.

“So far, we think we are getting some effect, it is kind of early,” Bernanke said today at the University of Michigan’s Gerald R. Ford School of Public Policy. “We are going to continue to assess how effective” the program is “because it is possible that as you move through time and the situation changes that the impact of these tools could vary.”

Euro Outlook

The euro may climb to $1.3835, the highest since November 2011, after breaching resistance last week in the area of $1.33 to $1.3309, Cilline Bain, a London-based technical analyst at Credit Suisse Group AG, wrote today in a client note. The 14-month high represents a 50 percent long-term Fibonacci retracement, the analyst wrote.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Resistance refers to an area on a price graph where analysts anticipate sell orders to be clustered.

A technical indicator signaled the euro may be headed for a reversal of its rise versus the dollar. The shared currency’s 14-day relative-strength index was at 68.6, approaching the 70 level some traders see as a sign an asset has gained too quickly.