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Yen Jumps Most Since March 2011 as Aso Says Decline Was Too Fast

Feb. 8 (Bloomberg) -- The yen jumped the most since March 2011 against the dollar after Japanese Finance Minister Taro Aso told reporters the pace of its recent slide has been too rapid.

Japan’s currency rose for a second day versus the greenback as Aso earlier said in parliament the government hadn’t anticipated a sudden move to around 90 per dollar. The yen headed for its first weekly gain in two months against the euro after European Central Bank President Mario Draghi signaled yesterday that further interest-rate cuts in the region remain a possibility. The Australian and New Zealand dollars rallied as China’s trade expanded more in January than economists forecast.

The yen “is vulnerable to concern that it has done way more than anyone thought it possibly could,” said Kit Juckes, head of foreign-exchange research at Societe Generale SA in London. “What’s going to matter as the market reacts to these kind of comments is how many people are queuing up” to sell the currency, he said.

The yen surged 1.4 percent to 92.32 per dollar at 7:59 a.m. New York time after rising 1.6 percent, the biggest gain since March 17, 2011. The currency climbed 1.5 percent to 123.63 per euro after depreciating to 127.71 on Feb. 6, the weakest since April 2010. The euro declined 0.1 percent to $1.3387.

Japan’s currency has tumbled 18 percent in the past six months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, in anticipation of the greater monetary stimulus advocated by Shinzo Abe, who became prime minister in December.

Korea Warning

The yen’s decline has spurred criticism abroad, with Aso’s South Korean counterpart complaining about the risk to his nation’s exports and Russia last month warning about the potential for reciprocal action to drive down exchange rates. Finance ministers and central bank governors from the Group of 20 nations are scheduled to meet in Moscow next week.

The yen gained for a third day versus the euro after Draghi suggested yesterday the recent appreciation of the 17-nation currency may damp inflation, a signal that further interest-rate cuts remain a possibility.

“Aso’s statement encouraged some retracement,” said Derek Halpenny, head of global markets research at Bank of Tokyo- Mitsubishi UFJ Ltd. in London. “The yen was stronger anyway before these reported comments, and euro-yen selling after Draghi’s statement yesterday may also have helped trigger some broader yen correction.”

Crisis Easing

Draghi’s comments yesterday came after the euro surged to a 2 1/2-year high against the yen two days ago amid signs the European debt crisis is easing.

“It’s unlikely there’s going to be a concerted effort to talk the euro down compared to the yen and the dollar,” Adrian Lee, chief investment officer at currency manager Adrian Lee & Partners in Dublin, which manages more than $5 billion, said in a Bloomberg Television interview. “With the yen weakening so much and so dramatically, it’s quite clear that the euro, of the Group of 3, is the place to put your money.”

The euro may strengthen to $1.45 in the next six months, Lee said.

Australia’s dollar rose for the first time in four days against the greenback after China’s government said exports gained 25 percent from a year earlier and imports rose 28.8 percent. China is Australia’s largest trading partner.

“Today’s data clearly suggests that the Chinese economy is starting to do better, so that should help put a floor under the Aussie,” said Thomas Harr, head of Asia local markets strategy at Standard Chartered Plc in Singapore. “The domestic economy is not doing that well, but clearly, it is a positive that China continues to improve.”

The so-called Aussie gained 0.5 percent to $1.0338 and New Zealand’s currency advanced 0.6 percent to 83.81 U.S. cents.

Increased Volatility

Currency volatility will probably increase this year as volumes increase, Citigroup Inc. said, citing trading platform and central bank figures.

Combined average daily volume on currency trading platforms by CME Group Inc., Thomson Reuters Corp. and ICAP Plc was $381 billion last month, up from $290 billion in December and $339 billion a year earlier, according to data compiled by Greg Anderson, Citigroup’s North American head of Group-of-10 currency in New York.

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