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.
The yen has tumbled 24% in the past 12 months, the worst performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes, as the Bank of Japan introduced a plan to double monthly bond purchases to step up its fight against deflation. The dollar gained 1.2% and the euro advanced 1.6%.
The Bank of Japan, which started a two-day policy meeting today, is targeting 2% inflation in two years after more than 10 years of entrenched deflation.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against currencies of six U.S. trading partners, rose 0.4% to 84.041 after climbing to 84.371 on May 17, the highest since July 2010.
St. Louis Fed President James Bullard and New York Fed President William C. Dudley speak today before Bernanke testifies in Congress tomorrow. Bullard said on April 17 that inflation had fallen too far below the Fed’s 2% goal and a further drop could prompt increased asset purchases by the central bank.
Sterling dropped versus all except one of its 16 major counterparts before the Bank of England releases minutes of its May 8-9 meeting tomorrow, which will reveal how many policy makers voted to boost asset purchases at the gathering.
Consumer prices climbed 2.4% in April from a year earlier, compared with 2.8% in March, the Office for National Statistics said in London. The median forecast of 35 economists in a Bloomberg News survey was 2.6%.
“This is a negative for sterling because quite clearly weaker inflation opens the door for more monetary stimulus,” said Peter Frank, global head of head of currency strategy at Banco Bilbao Vizcaya Argentaria SA in London. “It’s not a huge undershoot but it’s a fairly weak number before tomorrow’s crucial minutes. It cements investor decision-making to sell sterling.”
The pound slid 0.7% to $1.5153 after declining to $1.5140, the lowest since April 4. The U.K. currency fell 0.6% to 84.94 pence per euro after weakening as much as 0.6%, the most since May 7.
South Korea’s won strengthened for a second day versus the dollar on speculation the currency’s slide to a four-week low this week prompted some exporters to convert overseas earnings.
The won appreciated 0.5% to close at 1,110.74 per dollar in Seoul after declining to 1,121.08 yesterday, the weakest level since April 23.