Yen Falls to 92 Per Dollar First Time Since 2010

The yen depreciated to its weakest level in 2 1/2 years against the dollar and euro amid speculation Prime Minister Shinzo Abe will select a new Bank of Japan governor who will boost monetary stimulus.

Japan’s currency headed for 12th weekly decline versus the dollar as a report showed the jobless rate climbed and household spending fell. The euro strengthened for a fourth day against the greenback as data showed manufacturing in the 17-nation region shrank less in January than earlier estimated. The krona rose to a five-month high as Sweden’s manufacturing improved in December. The Dollar Index fell before a report that economists said will show U.S. employers added more workers.

Speculation about a new Bank of Japan governor “is the number-one source of the move we have seen in the yen,” said Peter Frank, global head of foreign-exchange strategy in London at Banco Bilbao Vizcaya Argentaria SA. “Because you are having that at the same time as strong equities, strong risk-on news flow generally, the yen is doubly weak.”

The yen sank 0.5 percent to 92.13 per dollar at 7:33 a.m. New York time, after earlier touching 92.30, the weakest since June 2010. It slid 1 percent to 125.74 per euro, after being as low as 126.16, the least since April 2010.

The euro gained 0.5 percent to $1.3648, after being as strong as $1.3675, the most since Nov. 14, 2011. Yesterday it completed the longest stretch of monthly advances against the dollar since May 2003.

Inflation Target

Japanese Economy Minister Akira Amari told reporters in Tokyo today that Abe may be narrowing the list of candidates to replace BOJ Governor Masaaki Shirakawa, whose term ends in April. Amid government pressure, the central bank last month doubled its inflation target to 2 percent and announced open-ended asset purchases to begin next year.

Kikuo Iwata, a Gakushuin University economics professor and a potential candidate to be the next BOJ governor, told lawmakers yesterday that deflation and the strong yen can be overcome with monetary policy alone.

Japan’s Labor Force Survey showed the nation’s unemployment rate climbed to 4.2 percent in December from 4.1 percent in the previous month. A separate report indicated spending among households fell 0.7 percent in the same period from a year earlier.

Employment Report

The yen has fallen 7.1 percent this year, the biggest decline among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar lost 0.6 percent and the euro climbed 3.2 percent.

Traders may “be concluding that the U.S. employment report will be supportive for dollar-yen later today while there is also some increased focus on the potential nominations for the three key BOJ posts,” Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a client note today.

A gauge of manufacturing in the 17-nation euro area rose to 47.9 from 46.1 in December, London-based Markit Economics said today, above an initial estimate of 47.5 on Jan. 24. The reading has been below the 50 level that indicates contraction for 18 months.

Europe’s common currency maintained gains as the European Central Bank said banks will repay 3.5 billion euros of its emergency three-year loans next week. A total of 27 financial institutions will use the second opportunity for early repayment of the initial three-year loan, the Frankfurt-based ECB said in a statement today. Banks returned 137.2 billion euros of long-term funds this week.

Dollar Index

“Positive sentiment towards the euro has exceeded even our own robust expectations and we believe this trend will continue,” Steven Saywell, the London-based head of currency strategy for Europe at BNP Paribas SA, wrote in a note to clients yesterday. The bank sees the currency at $1.38 by year-end, up from a previous estimate of $1.32, according to the report.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trade partners, fell 0.2 percent to 79.031.

The U.S. Labor Department will say employers hired 165,000 new workers last month, the most since August, following a 155,000 gain in December, according to the median forecast of 90 economists surveyed by Bloomberg ahead of today’s release. The unemployment rate in January held at 7.8 percent, where it’s been since November, the survey showed.

Bond Purchases

Federal Reserve Chairman Ben S. Bernanke signaled this week that he isn’t close to easing up on $85 billion in monthly bond purchases, which tend to debase the greenback, to spur growth and bring down unemployment. The central bank also left unchanged its statement that it plans to hold its target interest rate near zero as long as the jobless rate stays above 6.5 percent and inflation remains no more than 2.5 percent.

The currencies of Sweden and Norway both strengthened as reports showed manufacturing improved

Sweden’s purchasing managers’ index rose to 49.2 in January from 44.6 the previous month, Swedbank AB, which compiles the index, said today. Norway’s index rose to 50.5 from 50, indicating manufacturing expanded for a third month, Danske Bank A/S said.

Sweden’s krona climbed 0.9 percent to 6.3033 against the dollar, after strengthening to 6.2880, the strongest level since Aug. 30, 2011. The Norwegian krone advanced 0.4 percent to 5.4456.

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