The yen fell from a seven-week high on speculation Japan will intervene to curb recent gains that may hurt the overseas competitiveness of the nation’s exporters. Japan’s currency also weakened versus the euro on prospects investors took advantage of the yen’s advance to a five-week high to sell it. The Australian dollar surged after the nation’s central bank said it will likely need to raise interest rates “at some point.” The Dollar Index slid from near the strongest in a week before a U.S. report economists said will show job growth slowed in April. “There’s wariness over possible intervention, given the yen’s gains,” said Daisaku Ueno, president of Gaitame.com Research Institute in Tokyo, a unit of Japan’s largest currency margin company. “The yen is being sold.” The yen dropped to 80.52 per dollar as of 6:50 a.m. in London from 80.07 in New York yesterday, when it reached 79.57, the highest level since March 18. The currency fell 0.7 percent to 117.27 per euro, the sharpest drop since April 27. It climbed to 116.15 yesterday, the highest since March 29. The dollar weakened to $1.4565 per euro from $1.4539. The greenback is still headed for its first weekly advance in three versus Europe’s currency, having risen 1.6 percent. Japan’s currency strengthened beyond 80 per dollar yesterday for the first time since Group of Seven nations intervened in markets on March 18 to weaken the yen. The currency had surged to a postwar high of 76.25 the previous day, amid speculation Japanese investors would repatriate assets to pay for reconstruction from a record earthquake and a deadly tsunami on March 11. Yen’s Gains Chief Cabinet Secretary Yukio Edano and Finance MinisterYoshihiko Noda said today Japan will closely watch the foreign- exchange market, while Economic and Fiscal Policy Minister Kaoru Yosano said the yen’s volatile movements are troublesome. A stronger yen reduces the value of overseas income at Japanese companies when converted into their home currency. Markets in Tokyo reopened today after three holidays. The dollar declined before data today that may show the U.S. job market’s recovery is losing momentum. U.S. employers added 185,000 jobs in April after an increase of 216,000 positions in the previous month, according to the median forecast of economists in a Bloomberg News survey before the Labor Department’s report. “We’re forecasting U.S. non-farm payrolls of 165,000 in April, below market consensus for 185,000,” said Tohru Sasaki, head of Japan rates and foreign-exchange research at JPMorgan Chase & Co. in Tokyo. “Should this data be weak as we expect, the dollar-yen will likely decline and break 80 again on the back of falling stocks and U.S. yields.” Stocks, Treasuries The Nikkei 225 (NKY) Stock Average lost 1.4 percent, while the MSCI Asia Pacific Index of regional shares dipped 1 percent today. Ten-year Treasury yields slipped seven basis points to 3.15 percent yesterday. The Dollar Index, which tracks the dollar against the currencies of six major U.S. trading partners, slid 0.1 percent to 74.041 from yesterday, when it touched 74.225, the highest since April 26. The Australian dollar climbed against all its major counterparts after the Reserve Bank said higher interest rates may be needed to contain inflation. The outlook “suggests that further tightening of monetary policy is likely to be required at some point for inflation to remain consistent” with a goal of 2 percent to 3 percent in the medium term, the central bank said. The so-called Aussie jumped 1.2 percent to $1.0703, and gained 1.7 percent to 86.17 yen. The euro strengthened by as much as 0.3 percent against the dollar as economists surveyed by Bloomberg News said Germany’s industrial output rose 0.5 percent in March, after a 1.6 percent increase the prior month. The Economy Ministry in Berlin releases the data today. ‘Very Closely’ The European Central Bank left its benchmark interest rate at 1.25 percent yesterday. President Jean-Claude Trichet signaled the central bank will wait until after June to lift borrowing costs again. The ECB will monitor inflation risks “very closely,” Trichet said at a press conference. Inflation accelerated to 2.8 percent last month and economic growth has gathered momentum. “The ECB is still likely to raise rates, albeit at a gradual pace,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “This will probably be a positive for the euro versus the dollar and the yen.” The ECB will boost its benchmark rate by 76 basis points in the next 12 months, according to a Credit Suisse Group AG index based on swaps. To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

Source