The yen fell to the weakest in three years against the euro after Bank of Japan policy makers affirmed a plan to double the monetary base over two years and their statement showed no concern about rising bond yields.
Japan’s currency declined versus most of its major peers after a government report showed the trade deficit swelled more in April than analysts forecast. The dollar dropped for a third day against the euro before Federal Reserve Chairman Ben S. Bernanke addresses Congress on the outlook for the economy. The franc fell to the weakest since May 2011 versus the euro after Swiss National Bank President Thomas Jordan said an adjustment of the currency’s cap was possible.
“We’ve seen quite a broad move higher in the dollar, and dollar-yen is higher,” Daragh Maher, a London-based currency strategist at HSBC Holdings Plc, said in a telephone interview. “Bernanke might toe a reasonably middle-of-the-road line, but that kind of neutral stance would just point to a continuation of the trend, which is for a push higher in the dollar.”
The yen lost 0.7% to 133.23 per euro at 9:22 a.m. in New York after depreciating to 133.30, the weakest since January 2010. Japan’s currency dropped 0.5% to 102.96 per dollar after declining to 103.31 on May 17, the least since October 2008. The dollar fell 0.3% to $1.2939 per euro.
BOJ Governor Haruhiko Kuroda told reporters in Tokyo that the central bank will conduct its debt purchases in a flexible manner, and that the recent volatility in government securities isn’t yet affecting the economy. The central bank will expand the supply of money in the economy by 60 trillion yen ($582 billion) to 70 trillion yen a year, as pledged in April, the BOJ said.
“The yen appears to have got its first push lower from disappointing trade data that showed the weaker yen trend still has some way to go before Japan can correct its widening trade deficit,” said Eimear Daly, a currency analyst at Monex Europe Ltd. in London. “A failure of the BOJ minutes to mention rising yield levels allowed the yen to move further.”
Japanese exports rose 3.8% from a year earlier, the Finance Ministry said, less than the median 5.4% estimate of economists surveyed by Bloomberg News. The trade deficit expanded to 879.9 billion yen, the widest in three months.
The yen has tumbled 13% this year, the worst performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro advanced 2.7% and the dollar climbed 4.9%.
The greenback fell against the euro before Bernanke testifies to the Joint Economic Committee of Congress. The Fed is buying $85 billion a month in Treasury and mortgage debt to push down borrowing costs and spur growth.
“Bernanke isn’t hawkish, so I think he’s more likely to continue monetary easing,” said Takuya Kawabata, an analyst at Gaitame.com Research Institute Ltd. in Tokyo. “The market will probably respond with dollar-selling to Bernanke’s remarks.”
Fed Bank of New York President William C. Dudley said in an interview with Michael McKee airing today on Bloomberg Television that policy makers will know in three to four months whether the economy is healthy enough for the central bank to begin reducing stimulus.
The Federal Open Market Committee will release the minutes of its April 30-May 1 policy meeting today.
The franc weakened after Swiss National Bank President Jordan said a shift of the cap on the currency and negative interest rates are among measures it may take to prevent a tightening of monetary conditions.
“The adjustment of the minimum exchange rate is something that principally belongs to the options if needed,” Jordan told reporters in Frankfurt yesterday. “We will maintain the minimum exchange rate for as long as necessary.”
The franc slid 0.6% to 1.2592 per euro and reached 1.2614, the weakest level since May 20, 2011. The Swiss currency fell 0.3% to 97.30 centimes per dollar.
“Some of the Swiss selling on the news flow is understandable, but I don’t think it’s sustainable,” HSBC’s Maher said.
The pound declined to a four-week low against the euro after a government report showed U.K. retail sales unexpectedly dropped last month.
The U.K. currency slid to a six-week low versus the dollar after minutes of the Bank of England’s May 8-9 policy meeting showed Governor Mervyn King was defeated for a fourth month in his bid to expand stimulus. King, David Miles and Paul Fisher maintained their campaign to increase so-called quantitative easing by 25 billion pounds ($37.7 billion) from the current 375 billion pounds.
“The retail sales report today will add downward pressure to the pound,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. “I have a more optimistic view on the U.K. outlook than the market consensus but I can understand why the data today would boost speculation for further quantitative easing.”
The pound fell 0.6% to 85.70 pence per euro after depreciating to 85.78 pence, the weakest since April 22. The U.K. currency declined 0.4% to $1.5096 after falling to $1.5075, the lowest since April 4.
The Australian currency approached an 11-month low against the U.S. currency after Westpac Banking Corp. and Melbourne Institute said their index of consumer confidence slumped by the most in 17 months.
The Aussie dollar dropped 0.4% to 97.68 U.S. cents after sliding to 97.11 cents on May 17, the weakest level since June 5.