The yen advanced to a 15-year high against the dollar on speculation Prime Minister Naoto Kan will beat his rival Ichiro Ozawa in a party vote today, reducing the likelihood the government will intervene to weaken the currency. Japan’s currency also advanced versus 15 of its 16 major counterparts as the nation’s stocks declined, increasing demand for safer assets. New Zealand’s dollar slid the most in two weeks after a government report showed retail sales unexpectedly fell in July. China’s yuan surged to the strongest level since 1993 on speculation the government will allow faster appreciation to head off U.S. trade sanctions. “Kan has shown a less aggressive stance than Ozawa on currency intervention,” said Kazuya Yashiro, a Tokyo-based foreign-exchange analyst at Himawari Securities Inc. “His victory will therefore give some opportunities to test the upside of the yen.” The yen climbed to 83.39 per dollar as of 6:42 a.m. in London from 83.71 in New York yesterday, after advancing to 83.25, the strongest level since May 1995. The currency rose to 107.37 per euro from 107.83. The euro was at $1.2876 from $1.2883. New Zealand’s dollar slipped 0.7 percent to 72.90 U.S. cents, the biggest decline since Aug. 31, and dropped 1.1 percent to 60.80 yen. The yen has strengthened 15 percent this year against a basket of currencies from 10 developed-world nations, the best performer of the group, according to Bloomberg Correlation- Weighted Currency Indexes. The currency’s strength has prompted policy makers to consider measures to curb its appreciation, which makes Japanese exporters’ products more expensive. Kan Favored Kan and Ozawa each have the backing of about 190 of 411 lawmakers from the DPJ, Nikkei English News reported today, without saying where it obtained the information. Kan is believed to have the lead in mail-in voting from the party’s local assembly members and regional officials, the report said. The winner is assured of being prime minister because the DPJ controls the lower house. Ozawa said last week Japan may need to intervene to curb the yen’s gains without coordinated action from other countries, even if the impact is limited. “Polls suggest that PM Kan has the edge over his rival Ozawa,” analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, wrote in an note today. “Markets have priced in some of this likely victory. Both the yen and Japanese government bonds rallied yesterday. But the removal of the Ozawa intervention threat should see further gains in both.” Bold Action Japan’s Finance Minister Yoshihiko Noda said today policy makers are prepared to take bold action on currencies if necessary, including intervention. He also said the government is watching markets with great interest. The yen and the Swiss franc both rose as economic reports from New Zealand and the U.K. increased demand for safer assets. “Negative data from New Zealand and the U.K. are causing a bit of risk aversion,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “There seems to be buying of the yen as a safe haven.” The Nikkei 225 Stock Average dropped 0.5 percent, snapping a three-day gain. New Zealand’s dollar snapped a four-day rally as the decline in retail sales added to evidence the central bank will leave interest rates unchanged at a meeting this week. The kiwi dropped against all 16 of its major counterparts on speculation growth in New Zealand will slow this quarter as the nation’s worst earthquake in 80 years crimps output. The nation’s retail sales declined 0.4 percent from June, when they climbed a revised 1 percent, Statistics New Zealand said. ‘Still Subdued’ “Consumers are still subdued and very conscious about their spending,” said Khoon Goh, Wellington-based head of market economics and strategy at ANZ National Bank Ltd. “The earthquake put paid to any near-term rate hikes,” weakening demand for the currency. The pound fell against the dollar after a U.K. housing- market gauge slid to the lowest since May 2009. The number of U.K. real-estate agents and surveyors saying prices fell exceeded those reporting gains by 32 percentage points in August, down from minus 8 points in July, the Royal Institution of Chartered Surveyors said in an report today. “The RICS sales price wasn’t a great number,” said Phil Burke, chief dealer for global foreign exchange and rates at JPMorgan Chase & Co. in Sydney. “The pound has been under the pump, and is now down toward the overnight lows.” Pound Drops The pound weakened 0.2 percent to $1.5397, and dropped 0.2 percent to 83.638 pence per euro after touching 83.669, the lowest level since Sept. 6. China’s yuan gained after the central bank fixed the reference rate at 6.7378 per dollar, the highest since a peg against the dollar was scrapped in July 2005. The U.S. House Ways and Means Committee meets to discuss China’s currency policy tomorrow and Sept. 16. Premier Wen Jiabao said yesterday at a World Economic Forum meeting in Tianjin that the economy is in “good shape.” “China doesn’t want to see the relationship with the U.S. get hurt because of the currency issue,” said Lu Ting, a Hong Kong-based economist at Bank of America-Merrill Lynch. “There will be more space for yuan appreciation also because signs show the economy will have a soft landing.” The currency gained 0.2 percent to 6.7465 per dollar, after climbing 0.5 percent in the last three days, according to the China Foreign Exchange Trade System. To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

Source