The yen rose the most since May versus the dollar as Japanese Economy Minister Akira Amari said an excessively weak currency may hurt imports and households, damping expectations policy makers will try to push it down further.
Japan’s currency gained for the first time in five days against the dollar on bets its drop to the weakest level since June 2010 was excessive. The Swiss franc slid to a 13-month low versus the euro as signs Europe’s debt crisis is easing cut demand for the currency as a haven. South Africa’s rand fell after Anglo American Platinum Ltd. said it will cut output.
“Amari’s comments introduced the possibility that the government may be a bit concerned about the pace of the decline of the yen,” Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut. “A signal coming from Japanese officials that maybe the yen is weakening too quickly is something that might give the market a bit of pause.”
The yen appreciated 0.7% to 88.90 per dollar at 10:40 a.m. in New York and gained as much as 1.3%, the biggest intraday jump since May 17. It slid to 89.67 yesterday, the weakest level since June 25, 2010. Japan’s currency rallied 1% to 118.53 per euro. The dollar gained 0.4% to $1.3333 per euro.
Norway’s krone and South Africa’s rand were the biggest losers among the greenback’s 16 most-traded counterparts.
The krone fell after central bank Deputy Governor Jan F. Qvigstad signaled a persistent strength in the currency would influence the bank’s next rate decision in March. It dropped 1.2% to 5.5701 per dollar.
The rand weakened after Anglo American Platinum said it will shut four shafts, putting 14,000 jobs at risk and fueling concern South Africa’s current-account deficit will widen. The currency fell 1.2% to 8.7972 per dollar and touched 8.7975, the lowest since Dec. 5. Metals and other minerals accounted for 61% of South Africa’s exports in the first 11 months of 2012, according to government data.
The Swiss franc depreciated past 1.24 per euro for the first time since Dec. 7, 2011, as haven demand ebbed. European Central Bank President Mario Draghi said Jan. 10 the euro-area economy will slowly return to health in 2013. The currency fell 0.4% to 1.2384 per euro and reached 1.2413.
“The franc will underperform this year because the situation in the euro is looking more secure,” FxPro’s Derks said. “There will continue to be an unwinding of what were excessively short structural positions in the euro.”
The premium for three-month options granting the right to sell the franc versus the euro relative to those allowing for purchases surged today to the most since at least 2003, or as far back as Bloomberg tracks the data. The so-called risk reversal rate increased to as much as a 2.12 percentage-point premium for franc puts, from 1.78 yesterday and 0.87 a month ago. A put option gives the right, but not the obligation, to sell a currency.
The yen snapped a four-day losing streak, the longest since November.
“The market is massively short yen because investors are convinced it will weaken further on the back of the government’s policy,” said Michael Derks, chief strategist at FxPro Financial Services Ltd. in London. “When positions are that extreme, a comment like that from Amari can really swing the market.” A short position is a bet an asset will decline.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain, known as net shorts, was 74,096 on Jan. 8, figures from the Washington-based Commodity Futures Trading Commission show. Net shorts numbered 94,401 for the week ended Dec. 11, their lowest level since July 2007.
Amari said Japan faces risks from any decline too far in the yen, highlighting the limits on Prime Minister Shinzo Abe’s campaign to drive down the currency.
“If the yen excessively weakens, this would cause a spike in import prices,” Amari told reporters in Tokyo. “It would be a benefit for exports, but would have harmful effects on people’s livelihoods.”
The Bank of Japan will review its 1% inflation goal at its policy meeting on Jan. 21-22. The central bank will enact powerful monetary easing to help the weakening economy, Governor Masaaki Shirakawa said today at a meeting of BOJ branch managers. He is due to step down in April.
Goldman Sachs Asset Management Chairman Jim O’Neill said the Bank of Japan must show it’s serious about inflation targeting for the yen to weaken further.
“Classical indicators suggest it is oversold,” O’Neill said in an interview on “Bloomberg Surveillance” from London. The Bank of Japan “has got to show its going to take this 2% inflation target seriously. Rather than just a goal, it has to be a target,” he said.
The yen has slumped 16% in the past six months, the biggest decline among the 10 developed-market currencies tracked by Bloomberg Correlation Weighted Indexes, as Abe was swept to power with a pledge to weaken the currency. The dollar dropped 4.6% and the euro gained 4.8%.
The greenback rose versus most major peers. Retail sales in the U.S. increased more than projected in December, gaining 0.5% after a revised 0.4% increase in November, Commerce Department figures showed today. The median forecast in a Bloomberg News survey was for a 0.2% rise. A report by the Federal Reserve Bank of New York showed manufacturing in the New York region shrank in January for a sixth straight month.