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Yen Falls as Policy Comments Boost Depreciation Bets; Euro Gains

Feb. 11 (Bloomberg) -- The yen fell toward the weakest since May 2010 versus the dollar as Japanese officials signaled their commitment to policies that may cause it to depreciate.

Japan’s currency slid versus all of its 16 major peers after Economy Minister Akira Amari was reported by Kyodo News as saying the government should persevere with efforts to boost stocks. The yen slid for the first time in four days against the euro after Asian Development Bank President Haruhiko Kuroda, a potential candidate to head the central bank, suggested he favors greater stimulus. The euro rose before ministers from the currency bloc meet to discuss aid for Cyprus and Greece.

“The yen’s weakening trend remains extremely solid,” said Ian Stannard, the London-based head of European foreign-exchange strategy at Morgan Stanley. Amari’s comments are “reinforcing the market’s perception that Japan is very determined to put the policy in place to bring the economy out of deflation.”

The yen fell 0.8 percent to 93.44 per dollar at 7:37 a.m. New York time. It reached 94.06 on Feb. 6, the weakest since May 5, 2010. Japan’s currency dropped 1.1 percent to 125.27 per euro. The shared currency strengthened 0.3 percent to $1.3406 after declining to $1.3325, the lowest since Jan. 24.

Stannard estimated the yen will weaken to 95 per dollar and around 130 per euro, without specifying a time period.

The yen has dropped 19 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 stimulus advocated by Prime Minister Shinzo Abe.

Government Efforts

The government will continue in its efforts to drive the Nikkei 225 Stock Average to 13,000 by the end of the fiscal year on March 31, Amari said two days ago, Kyodo reported. The Nikkei index closed at 11,153.16 last week. Japanese markets are shut today for a public holiday.

ADB President Kuroda, a potential candidate to head Japan’s central bank, said in an interview in Tokyo today that the Bank of Japan has “many” policy tools to achieve its 2 percent inflation target. Credit Suisse Group AG Chief Japan Economist Hiromichi Shirakawa has said Kuroda is “the leading candidate” to succeed current BOJ Governor Masaaki Shirakawa, who will step down on March 19.

The Group of Seven nations are considering releasing a statement on exchange rates this week to calm concern the world is on the brink of a currency war, three officials from G-7 countries said. The current draft wording contains a commitment to market-set exchange rates and an agreement that governments don’t use fiscal or monetary policy to drive currencies, the official said.

G-7 Statement

The G-7 is looking to release the statement before a Feb. 15-16 meeting in Moscow of finance ministers and central bankers from the Group of 20, which includes the G-7 and emerging markets such as Brazil, China and India.

“2013 is the year of the currency war and country after country have to react to make sure that their currency doesn’t appreciate too much,” said Yannick Naud, a London-based portfolio manager at Glendevon King Ltd. who helps oversee about $160 million in assets. He spoke on Bloomberg Television’s “The Pulse” with Francine Lacqua and Guy Johnson.

Futures traders increased their bets that the euro will gain against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so- called net longs -- was 37,952 on Feb. 5, compared with net longs of 27,472 a week earlier. That’s the most since April 2011.

Ministers Meeting

Euro-area finance ministers might discuss the euro’s exchange rate at tonight’s meeting in Brussels, Dutch Finance Minister Jeroen Dijsselbloem said.

“It might be a subject today,” Dijsselbloem told reporters in Brussels as he arrived to chair the meeting. “We’ll discuss as usual the economic state in the euro zone and the issue might arise there.”

Sweden’s krona strengthened against all major counterparts before central bank policymakers meet on Feb. 13. The Riksbank will leave its benchmark rate unchanged at 1 percent, according to the median of 22 estimates in a Bloomberg survey.

The krona appreciated 0.8 percent to 6.3978 per dollar and gained 0.4 percent to 8.5803 per euro.

The Norwegian krone strengthened 0.5 percent to 5.5099 per dollar after a report showed a measure of inflation unexpectedly accelerated in January. Annual underlying inflation, which adjusts for taxes, fees and energy prices, picked up to 1.2 percent from 1.1 percent in December, Oslo-based Statistics Norway said.

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