The yen slumped after Prime Minister Shinzo Abe was approved as prime minister yesterday by parliament. His Liberal Democratic party won a landslide victory in lower house elections on Dec. 16, pledging to weaken the currency.
Japan’s consumer prices excluding fresh food fell 0.1 percent in November from a year earlier, according to a Bloomberg News survey before tomorrow’s report. The Bank of Japan’s inflation target is 1 percent.
Yen depreciation to “86.5 would be about as high as we’d go in this cycle,” Greg Anderson, the North American head of G- 10 currency strategy at Citigroup Inc. in New York, said in a television interview on Bloomberg Surveillance with Sara Eisen and Alix Steel. “We’ve had risk-on and we’ve hard risk-off days due to the fiscal cliff over the last month, and it hasn’t seemed to matter. The yen weakens every day.”
The yen’s 14-day relative strength index dropped to 19.7 against the dollar today and dropped to 20.2 versus the euro. A reading below 30 indicates an asset’s decline has been too rapid it is poised to rise.
The Dollar Index dropped for a second day as President Barack Obama and U.S. Congress return to Washington to resume negotiations over the fiscal cliff of more than $600 billion in automatic tax increases and spending cuts set to take effect next month.
Treasury Secretary Timothy F. Geithner said there’s “significant uncertainty” around tax and spending policies, according to a letter sent to congressional leaders yesterday.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, fell 0.3 percent to 79.40.