Yen Jumps Most in Three Weeks on Government Concern; Rand Slides

The yen gained the most in three weeks against the dollar as Japanese Economy Minister Akira Amari said further losses in the currency would have negative effects after it fell to the lowest since 2008 last week.

Japan’s currency rose versus 15 of its 16 most-traded peers after Amari said yesterday there’s speculation its past strength has “been corrected a lot.” New Zealand’s dollar climbed as Finance Minister Bill English said home prices will pressure the central bank to raise interest rates. South Africa’s rand slid to a four-year low amid bets slowing inflation will give the nation’s central bank room to cut rates.

Amari’s comments “were partially designed to at the very least slow the pace of the yen’s fall in recent sessions,” Joe Manimbo, a market analyst at Western Union Business Solutions, a unit of Western Union Co., said in a phone interview from Washington. “That was the catalyst for investors to pare back on some of their dollar enthusiasm.”

The yen advanced 0.9 percent to 102.27 per dollar at 5 p.m. New York time, after gaining as much as 1.2 percent, the most since April 26. It touched 103.31 on May 17, the weakest level since Oct. 6, 2008. Japan’s currency strengthened 0.6 percent to 131.75 per euro. The dollar weakened 0.3 percent to $1.2882 per euro after appreciating to $1.2797 on May 17, the strongest level since April 4.

Options Trading

Trading in over-the-counter foreign-exchange options totaled $28 billion, compared with $45 billion on May 17, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $6.1 billion, the largest share of trades at 22 percent. Euro-dollar options were the second most-actively traded, at $5.1 billion, or 18 percent.

Euro-dollar options trading was 120 percent above the average for the past five Mondays at a similar time in the day, according to Bloomberg analysis. Dollar-yen options trading was 26 percent below average.

New Zealand’s dollar, nicknamed the kiwi, climbed versus all of its 16 most-traded counterparts.

“These households heading into quite high debt to buy highly priced houses need to be aware at some stage the RBNZ will increase interest rates, particularly if the housing market keeps growing at rapid rates,” English said yesterday in an interview broadcast on Television New Zealand, referring to the Reserve Bank of New Zealand.

The kiwi rose 1.3 percent to 81.73 U.S. cents after falling to 80.61 cents on May 17, the weakest since Nov. 16.

Rand Slides

The rand dropped for an eighth day against the dollar, the longest losing stretch in a year, before the Monetary Policy Committee announces its interest-rate decision on May 23.

The South African Reserve Bank has left its benchmark repurchase rate at 5 percent since an unexpected reduction in July to support growth in Africa’s biggest economy. Lower commodity prices and slowing consumer demand are reducing pressure on inflation.

The rand sank 0.4 percent to 9.4432 per dollar and reached 9.4872, the weakest since April 2009.

The Czech koruna fell to a three-year low versus the euro after the Prague-based newspaper Hospodarske Noviny reported central-bank board member Lubomir Lizal as saying currency intervention is “much faster and more effective” than further lowering interest rates.

The koruna declined 0.5 percent to 26.161 per euro and touched 26.191, the weakest since May 2010.

Yen’s Drop

The yen has slumped 19 percent in the past six months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as Prime Minister Shinzo Abe pledged to beat deflation and the Bank of Japan doubled monthly bond purchases. The dollar gained 3.2 percent in the same period and the euro advanced 3.7 percent.

Japanese Economy Minister Amari said yesterday further yen weakness may hurt “people’s lives.” It’s government’s job to minimize that, he said on public broadcaster NHK.

“People still want to be short yen, but are just waiting for better levels,” Geoffrey Yu, a senior currency strategist in London at UBS AG, said in a telephone interview. “The market right now is somewhat inclined to look for reasons to sell dollar-yen rather than buy anything back.” Short positions are bets a currency will weaken.

Key Level

The yen may decline to its weakest level against the dollar in more than four and a half years after breaking a key level of support, according to JPMorgan Chase & Co.

The Japanese currency will face a test at 103.50 per dollar after breaching the 103-to-103.10 area on May 17, according to Niall O’Connor, a technical analyst at JPMorgan in New York. If the yen declines past that support level, it may target 105.50, the 61.8 percent Fibonacci retracement of the currency’s 2007 high, O’Connor said. That would be its weakest level since Oct. 3, 2008.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, fell 0.5 percent to 83.809 after rising to 84.371 on May 17, the highest since July 13, 2010.

The gauge has rallied 5 percent this year amid speculation the Federal Reserve will reduce the pace of its monthly bond purchases as the economy improves.

Fed Chairman Ben S. Bernanke will testify to the Joint Economic Committee of Congress on May 22, and the Federal Open Market Committee will release the minutes of its April 30-May 1 meeting the same day.

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