December 02, 2009

Yen Drops After Hatoyama Says Its Strength Can’t Be Tolerated

By Lukanyo Mnyanda

Dec. 2 (Bloomberg) -- The yen fell against all of its major counterparts after Japanese Prime Minister Yukio Hatoyama was cited by the Nikkei newspaper as saying the currency’s strength can’t be left as it is.

Japan’s currency headed for its first back-to-back losses in two weeks against the dollar following the Nikkei report. Chief Cabinet Secretary Hirofumi Hirano said later Hatoyama wasn’t indicating the government is ready to intervene. The dollar traded at almost a 16-month low versus the euro on increased demand for riskier assets before a report forecast to show U.S. companies cut fewer jobs last month.

“The market is quite aware that the Bank of Japan will likely intervene if the yen appreciates too much,” said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-largest lender. “Risk appetite is also driving the market at the moment, and the dollar will also be under pressure due to the low financing costs.”

The yen weakened 0.6 percent to 87.18 per dollar at 7:43 a.m. in New York, from 86.68 yesterday. Japan’s currency declined 0.6 percent to 131.51 against the euro, from 130.74. The dollar was little changed at $1.5086 versus the euro, compared with $1.5081. It depreciated to $1.5144 on Nov. 25, the weakest level since August 2008.

Rapid fluctuations in the currency market are undesirable, and the government is closely monitoring the situation, Hirano told reporters in Tokyo following Hatoyama’s comments.

Intervention View

Volatility may hamper growth, and the central bank is open to taking steps to support the economy, a Bank of Japan board member, Miyako Suda, said in a speech in Kofu, west of Tokyo. Central banks intervene by buying or selling currencies to influence exchange rates.

The yen rallied 4.3 percent versus the dollar in November, helping to erode profits of exporters including Sony Corp. and Toyota Motor Corp. It reached a 14-year high of 84.83 against the U.S. currency on Nov. 27.

The Australian dollar rose 0.9 percent to 80.86 yen and was up 0.2 percent against the dollar at 92.71 cents today. The New Zealand dollar gained 0.9 percent to 63.48 yen and strengthened 0.2 percent to 72.76 cents.

Benchmark interest rates are 3.75 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets.

The so-called Aussie got a boost as gold, Australia’s third-most-valuable raw-material export, advanced to a record for a second straight day, reaching $1,217.23 an ounce.


Japan should ask the U.S. and Europe to take coordinated action to weaken the yen, Financial Services Minister Shizuka Kamei said in an interview in Tokyo today.

“We need international coordination,” Kamei said. Kamei, whose People’s New Party is a coalition partner to the Democratic Party of Japan, said he has urged Finance Minister Hirohisa Fujii to seek international cooperation to halt the currency’s rise.

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