The yen fell versus the dollar and euro on speculation Japan sold its currency after intervening in the foreign-exchange market last week for the first time in six years. Japan’s currency slid 1 percent in a 10-minute period after Kyodo News cited an unidentified market source as saying Japan sold the yen today to protect exporters. The yen subsequently regained most of the decline. Finance Minister Yoshihiko Noda said earlier today the government may take “bold” action to curb excessive yen moves. The euro advanced against the dollar after German business confidence unexpectedly rose. “It seems there was some mild intervention today,” said Roberto Mialich, a senior currency strategist at UniCredit SpA in Milan. “We can imagine that the Bank of Japan will intervene again in more depth, so traders should be very cautious.” The yen dropped 0.3 percent to 84.60 per dollar at 9:32 a.m. in London from 84.38 in New York yesterday, after earlier falling as much as 1.2 percent, the most since Japan intervened on Sept. 15. The currency weakened 0.8 percent to 113.24 per euro. The dollar was 0.6 percent weaker at $1.3328 per euro, leaving it down 2.6 percent this week. Japan’s currency has gained 1.4 percent against the yen since Sept. 15. Intervention that day pushed the yen down to a one-month low from the strongest level in 15 years. The yen also weakened as Reuters reported that Bank of Japan Governor Masaaki Shirakawa may resign. The central bank later denied the speculation, saying Shirakawa had no plans to step down. Outlasting Speculators Morgan Stanley forecasts the yen will weaken to 93 per dollar by year-end, predicting Japanese policymakers will outlast speculators, according to a research note yesterday. Japan “will again aggressively intervene in the foreign- exchange markets,” wrote Calvin Tse, a currency strategist at Morgan Stanley in New York. “If they intervene with enough vigor, this may prompt many market participants, who are currently very long yen, to unwind their positions.” Europe’s common currency rose against 14 of its 16 most- actively traded peers. The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, increased to 106.8 from 106.7 in August, the highest since June 2007. Economists had expected a drop to 106.4, according to the median of 36 forecasts in Bloomberg News survey. The dollar headed for a second weekly drop against the euro on concern the Federal Reserve is moving closer to boosting debt purchases. Fed Chairman Ben S. Bernanke speaks at Princeton University on lessons from the global financial crisis. Bernanke and his fellow policy makers said Sept. 21 they were willing to do more to spur growth and support prices, indicating they may add securities to the Fed’s holdings, a measure known as quantitative easing, or QE. Nomura Forecast “The Fed’s emphasis on low inflation means the market will continue to speculate on a new round of quantitative easing, beginning perhaps as soon as November,” said Imre Speizer, a market strategist in Wellington, New Zealand, at Westpac Banking Corp. “That will keep the dollar under pressure.” Nomura Holdings Inc. yesterday forecast the dollar would weaken by year-end and into 2011 on expectations the Fed will extend purchases of Treasuries into the fourth quarter. The company lowered its projection for the dollar to end 2010 at $1.35 per euro, compared with $1.25. Nomura forecast the greenback at 1.04 Swiss franc, compared with 1.12. “European currencies are likely to respond the most, especially now that Japan has started to intervene to reduce strengthening pressure on the yen,” analysts led by Jens Nordvig, managing director of currency research at Nomura in New York, wrote in a note. Ireland’s Banks Futures on the Chicago Mercantile Exchange show a 62 percent chance the Fed will keep its target rate for overnight bank lending between zero and 0.25 percent through its June 2011 meeting, compared with a 52 percent probability a month ago. Gains in the euro were tempered on concern Ireland’s banking crisis will worsen, diminishing the appeal of assets in the 16-nation region. The cost to insure Ireland’s debt climbed to a record yesterday on speculation Anglo Irish Bank Corp. won’t pay back bondholders in full. “There are worries over Ireland and equities are falling,” said Satoshi Okagawa, head of the foreign exchange and money trading group in Singapore at Sumitomo Mitsui Banking Corp., a unit of Japan’s third-largest banking group. “This may be leading to euro selling.” Investors are fleeing Irish bonds on concern bank bailout costs and a shrinking economy will hinder efforts to curb the European Union’s largest budget deficit. Government guarantees covering some of the subordinated debt sold by the nation’s banks come to an end next week. To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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