BLBG: Yen Falls to 12-Week Low Against Dollar on Loss of Haven Allure
The yen fell to a 12-week low against the dollar on concern a government report tomorrow will show the trade deficit widened to the most in more than two decades, reducing the allure of the currency as a haven.
Japan’s currency also traded near the weakest level in a month versus the euro on concern the economy will keep shrinking after a gross domestic product report last week showed the recession is deepening. The dollar weakened versus the euro on speculation a U.S. report today will show home prices fell at the fastest pace on record in December.
“The yen appears to be losing some of its safe-haven status,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Japan’s economic and political situation is poor, which may be behind this.”
The yen fell to 95.07 per dollar as of 12:59 p.m. in Tokyo from 94.61 yesterday in New York. It touched 95.20, the weakest level since Dec. 1. Japan’s currency declined to 120.90 per euro from 120.10 yesterday, when it touched 121.93, the lowest since Jan. 19.
The dollar weakened to $1.2717 per euro from $1.2694 yesterday. It fell to $1.4552 against the British pound from $1.4487 and traded at 1.1685 Swiss francs from 1.1686.
Japan’s currency declined for a fifth day against the euro, the longest stretch since September, as the Ministry of Finance may say tomorrow the nation’s trade deficit widened to 1.2 trillion yen ($12.7 billion) in January, the largest shortfall in 23 years, according to a Bloomberg News survey.
Bank Capital
Demand for the yen as a haven also declined after U.S. financial regulators said yesterday they will begin examinations this week to determine if banks have enough capital, according to the statement. Citigroup Inc. and Bank of America Corp. jumped on the announcement even as the Standard & Poor’s 500 Index closed at the lowest level in 12 years.
“The injection of additional capital into banks should gradually help stabilize the financial system in the U.S., which is saddled by the bad debt problem,” said Masashi Hashimoto, a Tokyo-based foreign-exchange analyst at Bank of Tokyo Mitsubishi UFJ Ltd., an unit of Japan’s biggest banking group. “This will support the dollar.”
American International Group Inc., the insurer rescued by the government, is in talks with the U.S. for more funding as it prepares to report the biggest corporate loss in American history, CNBC reported, citing unidentified people familiar with the situation. AIG may report a loss of as much as $60 billion, CNBC’s David Faber said.
Worst Month
The yen is heading for 5.5 percent decline against the dollar in February, its worst month since April 2004, after government reports showed Japan is sinking deeper into recession, with fourth-quarter gross domestic product contracting at an annual rate of 12.7 percent, the most since the 1974 oil shock.
The dollar dropped against the euro on concern the S&P/Case-Schiller index of home prices in 20 U.S. cities fell 18.3 percent in December from a year earlier, the largest decline since January 2001 when year-over-year records began, according to a Bloomberg News survey of economists. The report is due for release at 9 a.m. in Washington.
“U.S. economic data due this week may underscore the unabated decline of the housing market, which should bode ill for the dollar,” said Shinya Furue, a Tokyo-based economist at Norinchukin Research Institute Ltd. “If the housing data are weak enough, the dollar may fall back to between 90 yen and 92 yen.”
Home Sales
The Commerce Department may say on Feb. 26 that new home sales fell to a record 324,000 in January on an annual basis, a separate Bloomberg survey showed.
Federal Reserve Chairman Ben S. Bernanke is scheduled to deliver his semi-annual monetary policy report before the Senate Banking Committee today and before the House Financial Services Committee tomorrow.
Demand for the euro may wane on speculation an Ifo Institute report today will show the business climate index was unchanged at 83.0 in February, close to the weakest reading since November 1982. Ifo will release the report, based on a survey of 7,000 executives, at 10 a.m. in Munich.
“Given mounting economic challenges in the eurozone and neighboring countries, the European Central Bank is unlikely to be able to signal an end to the rate cutting cycle,” said Yousuke Hosokawa, a senior foreign-exchange dealer at Chuo Mitsui Trust and Banking Co. in Tokyo. “This may potentially be a euro negative.”
