The yen fell to a three-month low against the dollar after a government report showed Japan’s trade deficit widened to the most in more than two decades, diminishing the appeal of the currency. Japan’s currency declined to the lowest in six weeks against the euro as the data added to a government report last week that showed the world’s second-biggest economy shrank the most since the 1974 oil shock. The dollar may strengthen against the euro after President Barack Obama said the U.S. will emerge from its slump “stronger than before.” “The safe haven of the yen is in crisis due to the ongoing recession and the trade surplus that has become a deficit,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, a unit of France’s Credit Agricole SA. “Everyone is pessimistic about Japan and that’s really negative for the yen.” The yen weakened to 96.85 per dollar as of 9:21 a.m. in London, after touching 97.33, the lowest level since Nov. 25. It depreciated to 124.55 per euro after reaching 125.07, the weakest since Jan. 9. Japan’s currency may fall to 100 per dollar by the end of March, Kato said. The dollar traded at $1.2858 per euro from $1.2846, after yesterday’s 1.2 percent decline. The greenback weakened to $1.4579 against the pound from $1.4481, and was at 1.1577 Swiss francs from 1.1601. The euro traded at 88.21 pence, from 88.71 pence yesterday, when it reached 87.28 pence, the lowest level since Feb. 10. Asian Stocks The MSCI Asia Pacific Index of regional shares climbed 1.7 percent and the Nikkei 225 Stock Average advanced 2.7 percent. Honda Motor Co., which gets more than half its sales from North America, advanced 8.1 percent as the weaker yen boosted its earnings prospects overseas. Japan’s trade deficit widened to 952.6 billion yen ($9.8 billion) in January from a revised 322.3 billion yen in December, the Finance Ministry said today in Tokyo. Economists forecast an increase to 1.2 trillion yen, according to a Bloomberg survey. The dollar may pare this month’s decline against the euro as Obama, delivering his first address to a joint session of Congress, said the bank deposits of Americans are safe and he vowed to make certain the banking system remains solvent. “The markets like the fact that Obama’s trying to tighten things up and striking an optimistic tone,” said Gerrard Katz, head of foreign-exchange trading in Hong Kong at Standard Chartered Plc. “That would be supportive of the dollar.” Federal Reserve Chairman Ben S. Bernanke yesterday rejected the idea that officials plan to use reviews of banks’ balance sheets as a pretext for government takeovers of the nation’s largest lenders. Dollar Index The ICE’s Dollar Index, which tracks the greenback against six major trading partners including the euro and the yen, was at 86.793 today from 86.895 yesterday. The euro traded near a two-week low against the pound on speculation European Central Bank policy makers will signal today they will cut interest rates again next month to combat the recession in the 16 nations that share the currency. ECB Governing Council member Axel Weber said yesterday he sees a benchmark lending rate of 1 percent as the “lowest limit.” Fellow board member Mario Draghi on Feb. 21 said current low interest rates are not a reason for policy makers to shy away from further cuts. “The ECB will lower interest rates next week and the market may even start pricing in additional rate cuts after that,” said Daisuke Uno, chief bond and currency strategist at Sumitomo Mitsui Banking Corp. in Tokyo. The euro will weaken to 105 yen by the end of March, he said. The euro-region economy contracted the most in at least 13 years in the fourth quarter, pushing it into a deeper recession, a report showed on Feb. 13. ECB Rate Bets Investors added to bets the ECB will reduce its 2 percent benchmark rate at its March 5 meeting. The yield on the three- month Euribor interest-rate futures contract due in March fell to 1.69 percent today ,from 1.73 percent a week ago. The yen may be losing its appeal as a refuge from turmoil as the financial crisis that morphed into a global economic slump hammers Japanese exports, according to some analysts and investors. The yen was the best performer in 2008 among the 171 currencies tracked by Bloomberg, climbing 23 percent versus the dollar and 29 percent against the euro as equity markets collapsed worldwide. Japan’s currency slumped 6.7 percent against the greenback this year even as global stock markets extended losses. “The yen is being re-rated lower,” Richard Grace, Sydney- based chief currency strategist at Commonwealth Bank of Australia, wrote in a research note today. “A reduction in Japan’s current-account surplus reduces the safe-haven status” of the currency, he said. Commonwealth Bank recommends investors buy the dollar “on a dip” to 94.80 yen, with a target of 108.50 yen and a stop-loss order at 90 yen. A stop-loss order is an automatic instruction to sell or buy a currency should it reach a particular level.

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