The yen slumped to the lowest in more than six months against the dollar on speculation Japanese elections next month will hand power to an opposition party that advocates more aggressive monetary easing.
The dollar declined against the euro for a second day as U.S. jobless claims rose and a regional manufacturing index decreased amid the devastation left by Hurricane Sandy. Japan’s currency weakened against all of its 16 most-traded counterparts on speculation the vote will favor Shinzo Abe, who called for the central bank to provide unlimited stimulus. The pound fell to a 10-week low versus the dollar as data showed U.K. retail sales slid.
“There are new pressures for policy members to potentially engage in easing to boost inflation and domestic growth,” Ravi Bharadwaj, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. (WU:US), said in a telephone interview. “That expectation for a lax policy is causing markets to double down on other investments instead of focusing on the yen.”
The yen dropped 1.2 percent to 81.17 per dollar at 5 p.m. New York time, after touching 81.46, the weakest level since April 25. It depreciated 1.5 percent to 103.75 per euro after losing as much as 1.8 percent, the most since Sept. 14. Europe’s shared currency rose 0.4 percent to $1.2781.
The Dollar Index, which tracks the greenback versus six major peers, was little changed at 81.032.
The greenback may struggle to rise above a key technical level at 81.49 yen, Credit Suisse Group AG said, citing technical indicators. Should the dollar appreciate beyond that resistance level, where sell orders may be clustered, it may rise to the 81.87 level reached on April 10, London-based analyst Cilline Bain said today in a telephone interview.
Britain’s pound fell for a second day against the euro after data showed retail sales including fuel dropped 0.8 percent in October from September, when they gained a revised 0.5 percent. The median forecast in a Bloomberg News survey was for a 0.1 percent decline.
Sterling fell 0.2 percent to 80.55 pence per euro after touching 80.65, the weakest since Oct. 31. It rose 0.2 percent to $1.5867 after falling to $1.5829, the lowest since Sept. 5.
Australia’s dollar declined against all of its major peers except the yen after the nation’s Reserve Bank said it increased sales of the currency last month to a category of buyers that includes foreign central banks.
The RBA sold A$483 million ($500 million) more in local currency than it bought in October through the so-called other outright transactions category, the most since June 2009, according to data released today.
“There will likely be more chatter that the RBA is perhaps conducting off-market, central bank-to-central bank transactions,” said Emma Lawson, a Sydney-based foreign- exchange strategist at National Australia Bank Ltd.
The Aussie slid 0.4 percent to $1.0332.
The dollar weakened as applications for jobless benefits surged by 78,000 to 439,000 in the week ended Nov. 10, the most since April 2011, the Labor Department said today in Washington. Several states said the increase was due to the storm that hit the Northeastern part of the U.S. in late October.
The Federal Reserve Bank of Philadelphia’s general economic index decreased to minus 10.7 in November from 5.7 a month earlier. A reading of zero is the dividing line between expansion and contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware, which was hard hit by Sandy.
A separate report showed the consumer-price index rose 0.1 percent, matching the median estimate of 83 economists surveyed by Bloomberg, following a 0.6 percent gain the prior month, the Labor Department reported today in Washington.
The yen will fall to 87 versus the dollar by the end of 2013 on an improved outlook for U.S. growth once the fiscal cliff and debt ceiling are resolved, Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, said in a research note.
If Congress doesn’t act by the end of the year, $607 billion in automatic spending cuts and tax increases are scheduled to take effect starting in January, while the $16.4 trillion debt ceiling must be raised before it’s reached early next year for the nation to continue to borrow.
Japanese Prime Minister Yoshihiko Noda will dissolve parliament tomorrow, triggering an election that polls show his Democratic Party of Japan will lose. The vote for the lower house will be held on Dec. 16, acting DPJ secretary-general Jun Azumi said yesterday.
“The biggest economic problem is prolonged deflation and a strong yen,” Abe, the head of the largest opposition Liberal Democratic Party, said in a speech in Tokyo today. “Markets will only start to react once unlimited monetary easing is conducted.”
Abe made a “a forceful statement that reinforces the likelihood of ongoing political pressure on the Bank of Japan (8301) to weaken the yen,” Dan Dorrow, head of research in Stamford, Connecticut, at Faros Trading LLC, said in a telephone interview. “They’re going to keep on doing stuff until the intermediate target for the yen goes weaker.”
In the euro area, data showed the economy slipped into a recession for the second time in four years.
Gross domestic product in the region slipped 0.1 percent in the third quarter after a 0.2 percent decline in the previous three months, the European Union’s statistics office in Luxembourg said today. From the year-earlier period, GDP dropped 0.6 percent.
The yen has fallen 6.8 percent this year, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro dropped 2.6 percent and the dollar declined 1 percent.
To contact the reporter on this story: Joseph Ciolli in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Dave Liedtka at email@example.com