The yen dropped against all of its major counterparts as Japan slid into its third recession in a decade, fueling speculation that the central bank will maintain economic stimulus measures. Japan’s currency fell for a third day against the dollar, touching its lowest level this month after a report showed the nation’s gross domestic product contracted an annualized 3.7 percent in the first quarter after a revised 3 percent drop in the prior three months. The dollar touched its lowest level this week against the euro before a report forecast to show U.S. sales of existing homes grew at a slower pace. The Swiss franc slid versus the dollar as investor confidence declined. “Our long-term outlook is for yen weakness,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “It will be left behind in the race for higher interest rates.” The yen depreciated 0.2 percent to 81.88 versus the dollar at 7:47 a.m. in New York, from 81.68 yesterday, after touching 81.96, its weakest level since April 28. Japan’s currency declined 0.3 percent to 116.66 per euro, from 116.37, dropping for a fourth consecutive day. The dollar traded at $1.4247 versus the euro, compared with $1.4250, after touching $1.4306, its weakest level since May 13. The Bank of Japan injected record amounts of cash into the money market after the March 11 earthquake disrupted production and prompted consumers to cut back spending. It also doubled to 10 trillion yen ($122 billion) a fund to buy assets such as corporate bonds and real estate investment trusts. Yen’s Decline The yen has lost 5.2 percent this year in the biggest decline among the 10 developed-nation currencies tracked under Bloomberg Correlation-Weighted Currency Indexes. The dollar has fallen 4.4 percent, and the euro has risen 2.7 percent. The Swiss franc depreciated 0.3 percent to 1.592 versus the euro and lost 0.2 percent to 88.23 centimes against the U.S. currency. An index of investor and analyst expectations that aim to predict economic developments six months in advance fell to minus 11.5 this month from 8.8 in April, declining for the first time in three months, figures from the ZEW Center for European Economic Research in Mannheim, Germany, and Zurich-based Credit Suisse Group AG (CSGN) showed today. The dollar touched its lowest level against the euro since May 13 before a National Association of Realtors report forecast by economists to show U.S. sales of existing homes rose 2 percent to a 5.2 million annual pace in April after gaining 3.7 percent in March. Goldman Sachs View Goldman Sachs Group Inc. lowered its forecasts for the greenback, citing poor growth prospects. The greenback will depreciate to $1.45 against the euro over three months compared with an earlier projection for it to trade at $1.40, Goldman Sachs said. The U.S. currency will decline to $1.50 in six months and $1.55 in 12 months, analysts led by London-based Thomas Stolper wrote in an e-mailed note dated yesterday. “For the dollar to stabilize or even to rally, investors need to be convinced of the case for additional long-term investments in the U.S.,” the analysts wrote. “With unemployment still high, fiscal consolidation looming and continued weakness in the real estate sector, the growth outlook remains less compelling in the U.S. than in many other regions or countries.” IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, declined 0.2 percent to 75.317. Stronger Kiwi New Zealand’s dollar rose after Finance Minister Bill English said in a budget released today that the government will return to surplus. The nation’s operating surplus is expected to be NZ$1.3 billion ($1 billion) in the year through June 2015, compared with a record NZ$16.7 billion deficit in the current period ending June 30. The government said it will save NZ$5.2 billion over four years to spend on earthquake recovery and core services. “We thought they were going to come up with a pretty tough budget, and it looks like that’s what they’ve delivered,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s biggest lender. “The markets responded positively.” The kiwi advanced 0.1 percent to 79.18 U.S. cents and climbed 0.4 percent to 64.68 yen. To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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