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.