The yen weakened against the dollar, halting its biggest gain in three weeks, after Japan’s Economy Minister Akira Amari backed away from weekend comments that prompted the currency to rally.
The yen dropped versus most of its major counterparts after Amari said he wouldn’t be drawn on where he thought its eight- month slide versus the dollar might end. Japan’s currency jumped yesterday after he said further weakness may hurt “people’s lives.” The Dollar Index rose before Federal Reserve Chairman Ben S. Bernanke speaks tomorrow. The pound slid to a six-week low against the dollar after inflation slowed, giving the central bank more room to boost stimulus.
“It appears Amari felt the need to clarify his comments, making them deliberately more vague to ease any international concerns,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We are reversing modest gains on the back of the initial comments. Our impression is still that the Japanese authorities would like to see the yen stabilize not far from current levels rather than continue to weaken significantly beyond the 110 level.”
The yen fell 0.5% to 102.82 per dollar at 8:21 a.m. in New York after jumping 0.9% yesterday, the biggest gain since April 26. Japan’s currency dropped 0.4% to 132.30 per euro after depreciating to 132.77 on May 14, the weakest since January 2010. The dollar rose 0.1% to $1.2869 per euro.
Amari said he hoped the yen would stabilize at a level that matches the nation’s economic fundamentals. “I have previously said that the overly strong yen is in the process of being corrected,” he told reporters in Tokyo. “I will not say it has been corrected, or where it will finish.”
The yen tumbled to 103.31 per dollar on May 17, the weakest level since October 2008, after strengthening to a post-World War II record of 75.35 in October 2011. A stronger currency makes Japanese-made products costlier overseas.
“Dollar-yen at the 102 level is probably seen in the process of correction from a very strong yen” by Japanese policy makers, said Daisaku Ueno, a senior foreign-exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo.