The yen fell to a seven-year low versus the dollar on speculation Japan’s Prime Minister Shinzo Abe is considering postponing a planned sales-tax increase and preparing to call a snap election next month.
The dollar rose versus major currencies on optimism U.S. growth will continue to outpace its peers. Sweden’s krona advanced after consumer prices fell less in October than economists forecast. Russia’s ruble fell as nations threaten to tighten sanctions, while the Swiss franc touched the strongest level versus the euro in two years.
“It all ties together how the tax hike is going to impact the economy, and that’ll influence how the Bank of Japan’s going to achieve the 2 percent inflation target,” Eric Viloria, a strategist at Wells Fargo & Co. in New York, said in a phone interview. “We see the dollar a buy-on-dip.”
The yen depreciated 0.7% to 115.63 per dollar as of 9:09 a.m. New York time and touched 116.10, the weakest level since October 2007. Japan’s currency slid 0.7% to 143.72 per euro. The 18-nation common currency was little changed at $1.2429.
The 14-day relative strength index for the dollar versus the yen has stayed above 70 every day this month, a level that some traders see as a signal an asset may have risen too far, too fast and is due to reverse course.
The ruble fell 1.8% to 46.690 per dollar, erasing an advance yesterday that was triggered by a central bank pledge to curb ruble funds available to speculators betting on further declines.
Pressure is building on Russian assets as a two-month-old cease-fire between pro-Russian separatists and Ukraine’s government crumbles amid spreading fighting in eastern Ukraine. Oil’s slide to a four-year low in London is also weighing on the ruble because it dims revenue prospects for the world’s largest energy exporter.
Switzerland’s franc appreciated to within 0.2% of the central bank’s 1.20-per-euro limit, the closest it’s been to the cap since September 2012, when the Swiss National Bank said it last sold francs to defend the currency. The franc was little changed at 1.20251 per euro and touched 1.20213 versus the common currency.
Switzerland’s central bank may step in to defend its cap on the franc against the euro at around 1.2010, according to UBS AG, the nation’s largest lender.
“The 2012 precedent suggests that the SNB might intervene and purchase euros at around 1.2010,” Beat Siegenthaler, currency strategist at UBS in Zurich, wrote in a note e-mailed to clients dated yesterday.
Swedish consumer prices fell 0.1% from a year earlier, compared with a median forecast for a 0.2% drop among economists surveyed by Bloomberg.
Minutes of the Riksbank’s October meeting showed policy makers saw economic activity strengthening and said they can take further measures to increase stimulus. Officials at the world’s oldest central bank last month cut the main interest rate by 25 basis points to zero.
“That SEK is outperforming on such marginal improvements in inflation data suggests the low level of expectations by markets,” Keng Goh, a foreign-exchange strategist at Royal Bank of Canada in London, wrote in an e-mailed note.
The krona strengthened 0.3% to 7.4109 per dollar after touching 7.4534 on Nov. 7, the weakest level since August 2010. It gained 0.2% to 9.2143 against the euro.
Abe is considering a vote on Dec. 14 or Dec. 21 after deciding on the tax increase, Japan’s Yomiuri newspaper reported, citing senior members of the government and the ruling Liberal Democratic Party.
LDP lawmaker Hiroyoshi Sasagawa said in an interview that preparations have begun, though only Abe can call a general election. Local LDP constituency offices are getting ready for a poll, according to three other people with knowledge of the matter.
Abe said in Beijing that he hasn’t decided anything about the timing of an election and that he couldn’t comment on exchange rates as prime minister.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose 0.1% to 1,095.16.
A report due Nov. 14 is forecast to show U.S. retail sales increased 0.2% in October from the previous month, when they slid 0.3%.
“The U.S. is the only country with a good economic outlook,” said Naohiro Nomoto, an associate for foreign- exchange trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “There are plenty of reasons to buy the dollar in the short term.”
The dollar could rally another 3.7% to 120 yen by the end of this year as short-term investors aren’t heavily positioned for further weakness in the Japanese currency yet, Citigroup Inc. foreign-exchange strategist Osamu Takashima wrote in a research note.
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