The yen and the dollar declined against most of their major counterparts after a Chinese report showing manufacturing accelerated boosted demand for higher- yielding assets. The two currencies also weakened on speculation the Federal Reserve and Bank of Japan will this week announce further measures to keep borrowing costs low to spur growth. South Korea’s won led Asian currencies higher as data showed inflation accelerated and exports climbed more than expected, boosting expectations the central bank will raise interest rates. “Stronger-than-expected Chinese PMI is boosting risk appetite,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Hong Kong. “This is leaving the dollar, the yen and the franc as the worst performers.” The yen declined to 112.48 per euro as of 7:54 a.m. in London from 112.12 in New York last week, when it gained 1.2 percent. Japan’s currency fell 0.8 percent to 79.67 per Australian dollar. The greenback dropped 0.2 percent to $1.3969 per euro, after sliding to $1.4011, the lowest since Oct. 25. The yen traded at 80.50 per dollar from 80.40. The MSCI Asia Pacific Index of shares gained 0.8 percent after China’s purchasing managers’ index rose to 54.7 last month from 53.8 in September. A second PMI, from HSBC Holdings Plc and Markit Economics, jumped to 54.8 from 52.9. Today’s reports added to a central bank statement last week in highlighting the economy’s momentum. BOJ Meeting The yen dropped the most in almost two weeks versus the euro as traders awaited the outcome of the central bank’s Nov. 4-5 meeting, which was originally scheduled for Nov. 15-16. “The BOJ probably brought forward its board meeting, with the aim of more monetary easing,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “This may slow down the yen’s appreciation.” The Bank of Japan, which left its benchmark rate and credit programs unchanged last week, plans to discuss purchases of exchange-traded funds and real-estate investment trusts at this week’s meeting, the central bank said. The yen earlier tumbled more than 1 percent against the dollar in less than two minutes in Tokyo trading, before retracing much of the decline. A Japanese government official declined to comment on the yen’s movements when speaking to reporters in Tokyo on the condition of anonymity. The Federal Reserve will meet on Nov. 2-3 and policy makers are expected to announce another round of government bond purchases, a policy known as quantitative easing, after they bought $1.7 trillion in debt from December 2008 to March. BOJ Timing The BOJ’s “timing has more to do with the effects on the market if the Federal Reserve decides to do a certain amount of QE that is judged to be quite aggressive,” Thio Chin Loo, a senior currency strategist in Singapore at BNP Paribas SA, said in a Bloomberg Television interview. “If the dollar does fall back on this aggressive QE, then the BOJ may want to step into the markets to stabilize the dollar-yen rate.” The Dollar Index, which IntercontinentalExchange Inc. uses to track the dollar against the currencies of six major U.S. trading partners including the euro and yen, fell 0.4 percent to 76.987, after touching 76.773, the weakest since Oct. 25. The won had its biggest gain in two weeks after government data today showed overseas sales climbed last month at the fastest pace since June, while Taiwan’s dollar climbed the most since April 2009. Both economies count China as their biggest export market. Regional currencies were also supported by speculation the Fed will this week announce additional monetary easing, spurring a flow of dollars into emerging-market assets. ‘Higher Inflation’ “Higher inflation definitely helps push the won stronger,” said Ha Joon Woo, a currency trader at Daegu Bank in Seoul. “This will add to criticism of the central bank for not being able to control consumer prices.” Korea’s consumer price index rose 4.1 percent in October from a year earlier, according to a government report released today. That surpassed the 3.4 percent median estimate in a Bloomberg survey. The won jumped 0.8 percent to 1,116.58 per dollar, the Taiwan dollar climbed 0.5 percent to NT$30.471 and Malaysia’s ringgit rose 0.7 percent to 3.0960. Australia’s dollar rose for a third day against the greenback on speculation the South Pacific nation will maintain its interest-rate premium as the U.S. and Japan debate further monetary-easing measures this week.. “There’s been a pick-up in volatility in the Australian dollar around RBA rate hike expectations,” said John Kyriakopoulos, head of currency strategy at National Australia Bank Ltd. in Sydney. “We suggest using any pullbacks in the Australian dollar as buying opportunities given we target a rise to $1.05 next year.” Australia’s central bank, which is forecast by economists to keep borrowing costs on hold tomorrow, will increase its benchmark by 44 basis points over the next 12 months, according to a Credit Suisse AG index based on swaps trading. Australia’s dollar rose 0.6 percent to 98.90 U.S. cents. To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomber.net; Monami Yui in Tokyo at myui1@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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