The yen reached the weakest since June 2010 versus the dollar after Japanese Prime Minister Shinzo Abe’s government said it will spend 10.3 trillion yen ($116 billion) in new stimulus efforts that tend to weaken a currency.
The euro climbed after Goldman Sachs Group Inc. strategist Thomas Stolper wrote in a note that the shared currency may rise to $1.37. The yen headed for a ninth weekly decline, the longest losing streak since 1989, on speculation the Bank of Japan is also preparing measures to spur growth. South Korea’s won gained to the strongest level against dollar in 17 months after the central bank kept interest rates unchanged.
“Abe announced fiscal stimulus in Japan, which is what sent the yen lower against the dollar,” Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York, said in a telephone interview. “We were expecting some sort of fiscal program, and they basically put some flesh on the bone.”
The yen fell 0.4 percent to 89.17 per dollar at 11:50 a.m. in New York and reached 89.45, the weakest level since June 28, 2010. The Japanese currency depreciated 1 percent to 119.04 per euro and touched 119.35, the least since May 2011. The euro climbed as much as 0.7% to $1.3366, the highest since April 3, before trading at $1.3353, up 0.6%.
The won advanced 0.5% to 1,054.69 per dollar, the strongest level since August 2011.
Japan’s government will spend about 3.8 trillion yen on disaster prevention and reconstruction, and 3.1 trillion yen on stimulating private investment and other measures, the Cabinet Office said in a statement.
The Bank of Japan is set to adopt the 2% inflation target advocated by Abe, doubling its existing goal of 1%, without setting a deadline for achieving it, according to people familiar with discussions within the central bank. They requested anonymity because the talks are private. The BOJ meets on Jan. 21-22.
“We needed to see further news flow to maintain the weakness in the yen, and we’ve seen that,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The BOJ are signing up to the government’s policy stance. For now, everyone is getting on to this train, and the question now is how far the yen can weaken.”
The yen’s 2.3% drop in the past week was the biggest among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar lost 1%, while the euro rose 1.4%.