The dollar declined 2.9 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen slid 14.9 percent and the euro fell 1 percent.
The euro weakened as Merkel said the economic environment will be more difficult in 2013 and Europe’s sovereign debt crisis was isn’t yet over though progress has been made.
“The reforms that we’ve agreed on are starting to take effect,” she said in a New Year’s television speech to the nation, sent today in advance by e-mail. “Nevertheless, we still need a lot of patience. The crisis is far from over.”
The euro has strengthened versus the greenback in 2012, ending a two-year losing streak, as the European Central Bank unveiled a bond-buying program in September to contain the region’s debt crisis.
Futures traders cut bets the euro will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed.
The difference in the number of wagers by hedge funds and other large speculators on a drop in the euro compared with those on a gain, so-called net shorts, was 2,549 on Dec. 25, the least since September 2011, the data showed Dec. 28.
The yen has slumped versus the dollar this month as the election of Prime Minister Shinzo Abe increased the likelihood the nation’s policy makers will step up measures to weaken the currency.
“Foreign countries have no right to lecture us,” Japan’s Aso told reporters in Tokyo on Dec. 28. He said the U.S. should have a stronger dollar and questioned whether Group of 20 nations had stuck to pledges from 2009 to avoid competitive currency devaluations.
The BOJ will hold its first 2013 policy meeting on Jan. 21- 22 when it releases updates on growth and consumer-price forecasts. Governor Masaaki Shirakawa said the BOJ will discuss details of an inflation target requested by Abe at the meeting, according to the Nikkei newspaper.
“What we’re witnessing here is an incredible shift in policy,” Jens Nordvig, managing director of currency research at Nomura Holdings Inc. in New York, said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene. “On top of that, they’re showing a new willingness to confront G-20 partners on currency issues. We could see a totally different type of policy framework.”
Declines in the yen may temper as the 14-day relative strength index against the dollar touched 19.8, below the 30 level for the 14th straight day. A reading of 30 or lower indicates an asset may have fallen too far too quickly.