The yen fell against the dollar, heading for its biggest quarterly loss since 2001, after Prime Minister Taro Aso said the government has yet to complete a stimulus plan to revive the economy. Japan’s currency dropped the most in a week versus the euro on speculation the European Central Bank will refrain from cutting interest rates further after it lowers them this week. The yen extended its first quarterly loss against the euro since June after a Japanese report showed the jobless rate jumped to a three-year high. The country is still in an “economic crisis,” Aso said today at a press conference in Tokyo. “There’s mounting concern about the deteriorating macro fundamentals in Japan,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “We’re looking for the yen to be weaker. The Japanese will become frustrated with the domestic returns in this economic environment and look to increase investments in higher-yielding assets overseas.” The yen dropped to 98.33 per dollar as of 6:08 a.m. in New York, from 97.26 yesterday. Japan’s currency fell to 130.64 per euro, from 128.36 yesterday, when it touched 126.42, the strongest level since March 16. The dollar traded at $1.3287 per euro, from $1.3199. Japan’s currency has tumbled 7.8 percent against the dollar this quarter, the worst performance since the last three months of 2001, and has weakened 3.1 percent per euro. Business Sentiment Confidence among Japan’s large manufacturers dropped to minus 55 in March from minus 24 in December, according to a Bloomberg News survey of economists before tomorrow’s Tankan report from the Bank of Japan. That would be the lowest since 1975. The jobless rate climbed to 4.4 percent in February, from 4.1 percent the previous month, the statistics bureau said today in Tokyo. The Australian and New Zealand dollars were the second- and third-best performers against the yen among the 16 most-traded currencies on speculation investors sought higher returns in those countries. Japan’s currency fell 2.4 percent against the Australian dollar to 67.87 yen and declined 2.4 percent versus New Zealand’s dollar to 56.09. “Asia set about on a huge buying spree of risk proxies, with the yen and the dollar stark underperformers,” Sue Trinh, senior currency strategist in Sydney at RBC Capital Markets, wrote in a note to clients today. Japan’s benchmark interest rate is 0.1 percent, compared with 3.25 percent in Australia, 3 percent in New Zealand and 1.5 percent in Europe. U.K. Stabilizing The pound rose to $1.4285 against the dollar, from $1.4266 yesterday after a report showed confidence among U.K. consumers increased to the highest level since May. The British currency headed for its first quarterly gain versus the euro since June. “We like sterling now that the pace of deterioration in the U.K. may be starting to stabilize,” said David Woo, the head of currency strategy in London at Barclays Capital. “There are compelling reasons to believe sterling may be starting to find the bottom against the euro.” Implied volatility on one-month dollar-yen options fell to 18.5 percent, from 19.2 percent yesterday, indicating a lower risk of exchange-rate fluctuations that can undermine currency investments. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of option prices. The euro rose for the first time in three days against the yen on speculation assets denominated in Europe’s currency will maintain their advantage over those in Japan even if the ECB cuts borrowing costs at its April 2 meeting. ECB Rates ECB President Jean-Claude Trichet and his colleagues will lower their key rate to 1 percent from 1.5 percent, according to a Bloomberg survey. ECB council member Axel Weber said this month the central bank shouldn’t cut borrowing costs below one percent. “The ECB will continue to be reluctant to cut rates or to move to quantitative easing,” said Satoru Ogasawara, a foreign- exchange analyst and economist in Tokyo at Credit Suisse Group AG, the second-largest Swiss bank. “The monetary-policy differentials make the euro better supported.” The ECB should continue to reduce rates and introduce quantitative easing to fight the euro area’s worst recession since World War II, the Organization for Economic Cooperation and Development said today in a report. Losses in the dollar may be tempered on speculation the U.S. government’s efforts to stem the nation’s financial crisis will help the world’s biggest economy recover. Dollar Index The government and the Federal Reserve committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to ease the recession. The Dollar Index headed for a fourth quarterly gain, the longest stretch since 2005, after President Barack Obama yesterday gave General Motors Corp. 60 days to develop a new strategy and provided Chrysler LLC with 30 days to complete a partnership with Italy’s Fiat SpA. Obama also told the companies to “fundamentally restructure” or lose government aid. “The U.S. is acting decisively and quickly to resolve the carmakers’ problems, which would be good for the overall economy,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-largest lender. “This is positive for the dollar.” Fed Governor Elizabeth Duke said in Charlotte, North Carolina yesterday the central bank is “committed to employing all available tools to promote economic recovery and to preserve price stability.” The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, declined to 85.218, from 85.869 yesterday, when it reached 86.125, the highest level since March 18.

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