Jan. 14 (Bloomberg) -- The yen fell to the weakest level versus the dollar since June 2010 on bets Japanese Prime Minister Shinzo Abe will select a central bank chief who will expand monetary easing, accelerating the currency’s decline.
Japan’s currency depreciated beyond 120 per euro for the first time since May 2011 after Abe said he wanted someone “who can push through bold monetary policy” as the next governor of the Bank of Japan, which meets next week. The dollar dropped to a 10-month low against the euro after Federal Reserve Bank of Chicago President Charles Evans said the U.S. should keep policy accommodative. The Swiss franc weakened as European leaders said the worst is probably over for the region’s crisis.
“The yen is likely to remain on the defensive in the near term as it’s being undermined by policy uncertainty,” said Lee Hardman, a London-based foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. “Investors are very nervous about what the government said, and what that will mean to the monetary policy.”
The yen depreciated 0.2 percent to 89.35 per dollar at 7:19 a.m. New York time after reaching 89.67, the weakest level since June 25, 2010. Japan’s currency slid 0.3 percent to 119.40 per euro and reached 120.13, a level not seen since May 4, 2011. The dollar declined 0.2 percent to $1.3366 per euro.
The New Zealand dollar rose against all of its 16 major counterparts after a report today showed an advance in retail spending. The currency advanced 0.6 percent to 84.16 U.S. cents and climbed 0.8 percent to 75.16 yen.
Japanese financial markets were shut today for a holiday.
Shirakawa Speech
The next governor of the BOJ must be a “bold policy leader,” Abe said yesterday on public broadcaster NHK’s “Sunday Debate” program. BOJ Governor Masaaki Shirakawa is due to speak tomorrow at a meeting of branch managers. He plans to step down in April after two of his deputies exit in March.
The BOJ will review its 1 percent inflation goal at its Jan. 21-22 policy meeting. Abe, whose Liberal Democratic Party swept to power in elections last month, has demanded the central bank double the target.
“It just seems that the government has the yen back in its hands and really has built up a lot of credibility,” Hong-Kong based Sacha Tihanyi, a senior currency strategist at Scotiabank, said today in an interview on Bloomberg Television.
The yen weakened 11 percent against the dollar in 2012, the most in seven years. The currency is still stronger than its 10- year average of about 101, hurting the competitiveness of Japanese exporters. Domestic manufacturers want the currency to trade between 90 and 100, Hiroshi Tomono, president of Nippon Steel & Sumitomo Metal Corp. said on Jan. 7 in Tokyo.
Dollar Weakens
The dollar dropped for a third day against the euro after Evans said at a forum in Hong Kong that the Fed should keep policy accommodative to support the economy and “too much austerity too soon could be very damaging to near- and medium- term growth.”
Republicans are calling for a reduction in federal expenditures as a clash looms over raising the government’s borrowing limit, after President Barack Obama and U.S. lawmakers agreed to avert $600 billion in automatic spending cuts and tax increases that had been scheduled to start this month.
‘Policy Normalization’
The Fed Bank of New York will say tomorrow its general economic index was at zero this month after a minus 8.1 reading in December, according to the median estimate of economists surveyed by Bloomberg News. Readings below zero signal contraction. Growth in retail sales slowed to 0.2 percent last month from 0.3 percent in November, a separate survey showed before the Commerce Department report tomorrow.
Fed Chairman Ben S. Bernanke will speak in Ann Arbor, Michigan today about monetary policy.
“Bernanke is going to disassociate ending quantitative easing with the start of policy normalization, suggesting that the interval between them could be years rather than months,” said Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney. “That would be positive for risk and negative for the dollar.”
The euro strengthened after German Finance Minister Wolfgang Schaeuble said on Jan. 11 the region is “over the worst of the crisis.”
Franc Slides
The 17-nation currency advanced most against the franc, which investors used as a haven as the euro area’s financial- market woes dented European asset values. The euro strengthened 0.5 percent to 1.2254 against the Swiss currency, and reached 1.22765, the strongest level since Dec. 15, 2011.
The euro may appreciate to $1.35, the strongest level since December 2011, after last week advancing through so-called resistance at $1.33 to $1.3310, JPMorgan Chase & Co. said.
The currency may rise to the $1.3480 to $1.35 area, which represents the 50 percent Fibonacci retracement of its decline from May 2011 to July 2012, Niall O’Connor, a New York-based technical analyst at JPMorgan, wrote in a note to clients.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Resistance refers to an area on a price graph where analysts anticipate sell orders to be clustered.
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