Yen Declines Fourth Day to Lowest Since May 2009 Against Dollar

The yen weakened to the lowest level against the dollar since May 2009 on speculation Bank of Japan measures to fight deflation announced last week will further debase the currency.

The yen dropped against all its 16 major counterparts for a fourth day after BOJ officials said last week they will boost monthly bond purchases to 7.5 trillion yen ($75 billion), exceeding the 5.2 trillion yen forecast by economists surveyed by Bloomberg News. The dollar was little changed versus the euro before Federal Reserve Chairman Ben S. Bernanke speaks.

“As far as dollar against the yen, it looks like there really isn’t any upside resistance until you get towards that psychological-risk level around 100,” Eric Viloria, a senior currency strategist at Gain Capital Group LLC in New York, said in a telephone interview.

The yen fell to as low as 99.50 per dollar, the weakest level since May 8, 2009, before trading at 99.47 as of 6:52 a.m. in Tokyo. It last traded weaker than 100 on April 14, 2009. The currency tumbled 3.4 percent last week.

Japan’s currency declined to 129.52 per euro, the least since January 2010, before trading at 129.49. The dollar was at $1.3018 per euro from $1.3009 yesterday in New York.

Peso Move

Mexico’s currency touched 12.2178 to the greenback after the country’s currency commission said it was suspending its daily dollar auction. Finance Minister Luis Videgaray said March 21 the government will allow the peso, which weakened 0.2 percent to 12.1966 versus the dollar, to float freely.

South Africa’s currency gained 1.2 percent yesterday versus the dollar amid speculation monetary stimulus by global central banks will continue, boosting demand for high-yielding assets. The rand rallied against the dollar for a fourth day, rising to 8.9900.

Poland’s currency rose 0.9 percent against the greenback, the most of the dollar’s 31 most-traded peers, climbing for a third day and reaching 3.1683.

French, Belgian and Austrian bond yields fell to records as investors sought higher-yielding alternatives to German bunds amid a flood of liquidity policy makers to revive economic growth. Italian and Spanish securities advanced, with Spain’s two-year yields dropping below 2 percent for the first time since October 2010.

Technical Level

The yen must pass a technical level to touch 100 per dollar for the first time in four years, Nomura Securities Co. said, citing trading patterns. Key support for the yen lies at 99.75, the 50 percent retracement on the Fibonacci chart from the 2007 low on June 22 of 124.14 to the all-time high of 75.35 reached on Oct. 31, 2011.

“It’s more of the same right now and the conversation has diverged into where’s the money going to end up,” Geoffrey Yu, a senior currency strategist at UBS AG in London, said of yen depreciation in a phone interview. “The yen flows, at the end of the day, they’re driven by yield.”

Fibonacci analysis theorizes that prices rise or fall by certain percentages after reaching a new high or low.

The BOJ on April 4 suspended a cap on some bond holdings and dropped a limit on debt maturities. Policy makers set a two-year horizon for their goal of 2 percent inflation. The central bank’s next policy meeting is on April 26.

Japan Policy

“We expect the market to price in extra policy announcements as we move towards the 26 April meeting,” Barclays Plc currency strategists including Chris Walker in London wrote in a note to clients. The bank forecasts the yen will drop to 103 per dollar within three months, compared with the median forecast for it to trade at 95 by the end of the second quarter, data compiled by Bloomberg show.

The yen has slumped 22 percent in the past six months, the worst performance of 10 developed market currencies tracked by the Bloomberg Correlation Weighted Indexes. The dollar gained 1.4 percent and the euro climbed 2.5 percent.

“Levels around 100 yen in the very short-term are definitely possible,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “Any doubts the BOJ would be very expansionary are off the table now and measures might even be increased if they find out it is not enough to create inflation.”

Fed View

Demand for the dollar was limited before Bernanke speaks at the Fed Bank of Atlanta 2013 Financial Markets Conference. The U.S. central bank’s next policy meeting is April 30-May 1.

The Fed is buying $85 billion of bonds a month in the third round of its quantitative-easing strategy to spur the economy. While policy makers reiterated after their March meeting the U.S. central bank will maintain its purchases until there’s significant improvement in the labor market, Bernanke told reporters the pace may be altered if warranted by a healing economy.

The South Korean won slid yesterday as heightened risk of conflict with North Korea spurred outflows of foreign funds. The currency weakened 0.8 percent to close at 1,140.15 per dollar in Seoul after depreciating to 1,140.36, the weakest since July 27.

“Tensions with North Korea are intensifying, making investors nervous,” said Jeon Seung Ji, analyst at Samsung Futures Inc. in Seoul. Authorities “may try to take action if they find market reactions are excessive, while investors will also eye the yen-won movement.”