Yen Tumbles After Minister Says Its Slide Isn’t Over Yet

The yen weakened for the first time in four days versus the dollar after Deputy Economy Minister Yasutoshi Nishimura said its decline isn’t over and a level of 100 versus the U.S. currency wouldn’t be a concern.

The Japanese currency dropped against all of its 16 most-traded peers after a Chinese report showed manufacturing expanded at the fastest in two years, reducing demand for the yen as a refuge. The euro gained after contraction in European manufacturing and services slowed, and Mexico’s peso rose amid stronger-than-forecast U.S. jobs data.

“The yen story is still alive,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA, said by telephone from New York. “When you have a combination of good dollar, good U.S. data, good euro data, and good Chinese data and you’re short yen, the tendency is for yen to underperform dollar and to some extent the euro.” A short position is a bet that a currency will weaken.

The yen slid 1.9 percent to 90.33 per dollar at 5 p.m. in New York, after strengthening 1.7 percent during the previous three days. It touched 90.56, the weakest level since June 2010. Japan’s currency dropped 2.4 percent to 120.83 per euro and reached 121.07, the weakest since April 2011. The euro gained 0.4 percent to $1.3377. It touched $1.3404 on Jan. 14, the highest since Feb. 29, 2012.

Peso Climbs

The Mexican peso rose against the greenback after claims for jobless benefits in the U.S., its biggest trade partner, unexpectedly dropped last week to a five-year low of 330,000. Mexico’s annualized inflation fell to a 15-month low in the first half of January, data showed, reinforcing bets the central bank will leave borrowing costs unchanged until next year.

The peso strengthened 0.4 percent to 12.6358 per dollar.

Israel’s shekel climbed against most of 31 major peers on speculation Prime Minister Benjamin Netanyahu will assemble a governing coalition able to curb the country’s budget deficit. This week’s elections gave Netanyahu the chance to serve a third term with a weaker mandate than four years ago, leading him to seek an alliance with centrist Yair Lapid’s Yesh Atid party.

The currency appreciated 0.6 percent to 3.7092 per dollar.

The yen slumped 18.5 percent in the past six months, the worst performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar lost 4.2 percent, and the euro advanced 6.5 percent.

‘Quite Tolerant’

“These short yen positions that have been building over the last two months will be quite tolerant of no change for a while in terms of the government actually delivering anything simply because you’ve had a change of government and the rhetoric has been so strong,” Adam Cole, global head of foreign-exchange strategy in London at Royal Bank of Canada’s RBC Capital Markets, said in an interview. “Investors will be prepared to give the new government time to deliver.”

The yen at 100 per dollar would be acceptable, Nishimura said in an interview in Tokyo, suggesting global criticism may fail to convince Prime Minister Shinzo Abe to temper his push to weaken the currency. German Chancellor Angela Merkel said today in Davos, Switzerland, that the Japanese government’s call for monetary easing is a risk to the global economic recovery.

Abe, who took office last month, is working to boost the economy and has called for “bold monetary policy” to defeat deflation and drive the yen lower.

The probability of the yen weakening to 100 by year-end was 27 percent today, according to options data compiled by Bloomberg.

Technical Level

The currency may slide to the weakest in 41 months versus its U.S. counterpart as it approaches a key level, according to Credit Suisse Group AG, citing technical indicators.

A breach of the support at 90.25 to 90.84 yen to the dollar may push the Japanese currency to 95, Cilline Bain, a London-based technical analyst at Credit Suisse AG, wrote today in a client note. Support is an area on a chart where buy orders may be clustered.

Japan’s currency fell in early Asian trading after HSBC Holdings Plc and Markit Economics said their preliminary reading of China’s Purchasing Managers’ Index increased to 51.9 in January from 51.5 the previous month. The data suggest China’s expansion at the start of 2013 will equal or exceed its 7.9 percent pace in the fourth quarter.

“Yen weakness kicked in squarely as a function of the Chinese data,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. “The Chinese data surprised to the upside for many people. The global backdrop is showing an improving trend that’s not factored into the market yet.”

Aussie Dollar

Australia’s currency snapped four days of losses against the yen, gaining 0.9 percent to 94.40. The Aussie dollar fell versus the greenback, losing 1 percent $1.0451 after gaining 0.5 percent on Jan. 22, the most on a closing basis in eight days.

“In terms of Aussie, people may be just adjusting positions,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford Connecticut, said in an telephone interview. “Maybe take some profits.”

The euro strengthened against most of its major counterparts after Markit Economics released its survey of purchasing managers in manufacturing and services.

A composite index based on the survey climbed to 48.2 this month from 47.2 in December, the data showed. A reading below 50 indicates contraction.

The 17-nation currency rose for the first time in five days against the Swiss franc, gaining 0.5 percent to 1.2431 francs.

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