Yen Resumes Slide as Finance Chiefs Fail to Single Out Japan

The yen resumed its historic decline as finance chiefs from the world’s developed nations avoided criticizing Japan for allowing the weakening of the currency to gain an unfair competitive advantage in trade.

The Japanese currency fell as Group of 20 officials debated adopting a tougher stance on exchange rates as they prepared to reiterate a pledge against devaluations. The yen has tumbled about 7 percent versus the dollar this year as new Prime Minister Shinzo Abe seeks more aggressive monetary policy, including the nomination of new Bank of Japan chief. Britain’s pound depreciated as retail sales unexpectedly fell in January.

“The G-20 didn’t really single out Japan, which gives policy makers in Japan the green light to continue the expansionary fiscal and monetary policies,” Omer Esiner, chief market analyst in Washington at the currency brokerage Commonwealth Foreign Exchange Inc., said yesterday in a telephone interview. “All indications are that we’re likely to get someone at the BOJ like-minded to Japan’s prime minister, and that the BOJ will continue to ease monetary policy.”

The yen fell 0.9 percent to 93.50 per dollar this week in New York and reached 94.46 on Feb. 11, the weakest level since May 2010. The Japanese currency fell 0.9 percent to 124.96 per euro. The shared currency was little changed at $1.3360 after falling yesterday to $1.3306, its lowest level since Jan. 24.

A 0.1 percent advance by the yen last week against the greenback ended 12 straight weeks of losses, the longest stretch in records compiled by Bloomberg dating to 1971.

Winners, Losers

The Swedish krona was the biggest winner among the U.S. currency’s 16 most-traded counterparts this week, and Britain’s pound dropped the most. New Zealand’s dollar rose, while Canada’s dollar fell for a second week.

The yen has been the worst performer this year among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes, depreciating 7.4 percent. The euro gained 2.1 percent, and the dollar rose 0.7 percent.

Futures traders decreased their bets that the yen will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on an increase -- so-called net shorts -- was 61,306 on Feb. 12, compared with net shorts of 68,413 a week earlier.

Net-long bets that the euro will rise against the dollar decreased to 24,181 as of Feb. 12, compared with 37,952 a week earlier, CFTC figures showed. Traders reversed their bets that sterling would gain against dollar, with net shorts totaling 16,776 on Feb. 12, versus net longs of 1,174 the week before.

Pound Weakens

The pound had its steepest weekly drop against the dollar since June after U.K. retail sales decreased in January for a second month, adding to evidence the economic recovery is faltering.

Sales including fuel fell 0.6 percent from December, when they dropped a revised 0.3 percent, the Office for National Statistics said yesterday in London. The median forecast of 24 economists in a Bloomberg News survey was for a 0.5 percent increase. From a year earlier, sales declined 0.6 percent, versus a forecast of a 0.9 percent gain.

“The data from the U.K. has disappointed once again,” Ian Stannard, London-based head of European foreign-exchange strategy at Morgan Stanley, told Guy Johnson yesterday in a Bloomberg Television interview. “Sterling can go quite a bit lower from here. Sterling will be one of the underperformers.”

The pound fell 1.8 percent to $1.5518. It depreciated 1.8 percent to 86.09 pence per euro.

Krona Climbs

Sweden’s krona touched a four-month high against the euro on Feb. 14, a day after the Riksbank refrained from monetary easing to weaken the currency. It climbed to 8.4282 and ended the week at 8.4477, up 2 percent.

The nation’s central bank left its benchmark interest rate unchanged at 1 percent, a decision that was predicted by 13 of the 22 economists surveyed by Bloomberg. The rest forecast a cut to 0.75 percent.

Swedish Finance Minister Anders Borg said last month that the Riksbank’s policy of not cutting rates further is propping up the krona and preventing the exchange rate from helping sustain a recovery.

“While the Riksbank’s decision was not that surprising, we are still a bit surprised that the krona strength doesn’t seem to have any significance for the Riksbank,” Carl Hammer, chief currency strategist at SEB AB in Stockholm, said on Feb. 13.

The krona touched 6.2732 per dollar, its strongest level since August 2011, on Feb. 13 before ending the week at 6.3222, up 2 percent.

Kiwi, Canada

New Zealand’s dollar, nicknamed the kiwi, gained 1.1 percent to 84.51 U.S. cents after reports showed increases in manufacturing, retail sales and consumer confidence. It touched 85.34 cents, the highest since September 2011. Canada’s dollar fell 0.4 percent to C$1.0064 per dollar after factory sales slid more than forecast.

The yen fell versus most major peers yesterday as Reuters reported that former BOJ Deputy Governor Toshiro Muto is the leading contender to become the next central-bank chief, citing people close to the selection process.

BOJ Governor Masaaki Shirakawa, criticized by politicians for not doing enough to end deflation, said last week he’ll step down on March 19, about three weeks before his five-year term is due to end.

“Muto is perceived as not as dovish as some of the candidates,” Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp, said yesterday. “A significant amount of the yen’s decline has been in not so much what the BOJ has done in the period but what they’re expected to do in the next year or two.”

Before it's here, it's on the Bloomberg Terminal.