The yen fell against its 16 major peers after gains to the brink of a record against the dollar stoked speculation Japan will intervene in currency markets. The yen dropped against the euro for the first time in five days after Japan’s Finance Minister Yoshihiko Noda said the nation’s currency is overvalued and he’s watching markets closely. The U.S. House of Representatives approved legislation to raise the debt limit and avert a possible default, damping demand for refuge currencies. Australia’s currency climbed for a second day versus the yen on speculation the Reserve Bank will today signal plans to increase borrowing costs. “The strength of the yen is getting to the point where it requires intervention in some form,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. Speculation that Japan will intervene “is a story, and the fact that the dollar-yen has bounced a bit tells you that the market is listening to the stories.” The yen weakened to 110.56 per euro as of 12:15 p.m. in Tokyo from 110.03 in New York yesterday. It dropped to 77.51 per dollar from 77.21. Japan’s currency reached 76.30 versus the greenback yesterday, the strongest level since it set a postwar record of 76.25 on March 17. The Swiss franc traded at 78.27 centimes per dollar from 78.36 yesterday, when it touched an all-time high of 77.31. The currency fetched 1.1163 per euro from 1.1165 yesterday, when it touched a record high of 1.1028 per euro. The 17-nation euro was at $1.4265 from $1.4250. Export Concerns Japanese officials are concerned that the yen’s strength will hurt domestic companies and undermine the nation’s recovery from the March 11 earthquake and tsunami, the Nikkei newspaper reported, without saying where it got the information. Noda declined to comment on currency intervention when speaking to reporters in Tokyo today. The yen briefly erased its loss against the dollar after Kyodo News reported Economy Minister Kaoru Yosano said he isn’t aware of any plan to intervene. Bank of Japan officials in the past week have voiced more concern about the currency, with board member Hidetoshi Kamezaki saying the central bank would need to act “proactively” should the yen’s gains pose a threat to growth and prices. Bank policy makers will convene on Aug. 5. “BOJ intervention in the past has only slowed the pace of JPY appreciation,” BNP Paribas SA analysts including New York- based head of currency strategy for North America Ray Attrill wrote in a research note dated yesterday. “If the BOJ does intervene the result may be the same unless it is complemented by monetary easing. Thus, we expect a bounce in USDJPY to remain short-lived if intervention does in fact take place.” Debt Accord Demand for the dollar was limited on concern the debt accord President Barack Obama and Congressional leaders reached will damp growth. The House approved legislation to raise the U.S. debt limit by at least $2.1 trillion and cut federal spending by $2.4 trillion or more. The measure goes to the Senate for a final vote planned today. “Looking ahead, people will be wondering whether the debt agreement will work, and spending cuts may weigh on growth,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The dollar won’t switch to a real upward trend.” U.S. personal income increased 0.2 percent in June after gaining 0.3 percent in May, according to the median estimate of economists in a Bloomberg News survey before today’s data. The Institute for Supply Management’s factory index fell to 50.9 in July, the lowest since July 2009, from 55.3 the prior month, data showed yesterday. Economists in a Bloomberg News survey projected it would drop to 54.5. Dollar Index The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, was little changed at 74.298 after rising 0.6 percent yesterday. The franc has gained 7.5 percent over the past month, making it the best performer among 10 major-economy currencies tracked by Bloomberg Correlation-Weighted Currency Indexes. The yen has risen 3 percent, while the dollar is down 1.7 percent and the euro has declined 3.6 percent. Reserve Bank of Australia Governor Glenn Stevens will keep the benchmark interest rate unchanged today at 4.75 percent for an eighth meeting, according to 21 of 25 economists in a Bloomberg News survey. “If the RBA genuinely believes 2012’s going to be better and momentum’s going to pick up, rates are probably too low,” said Grant Turley, a senior currency strategist in Sydney at Australia & New Zealand Banking Group Ltd., which forecasts the central bank will raise its key rate to 5 percent today. “Generally, we’re positive on the Australian dollar.” Australia’s dollar rose 0.4 percent to 85.05 yen following yesterday’s 0.4 percent advance. It pared earlier gains versus the greenback after a government report showed that building approvals unexpectedly fell in June from May. The so-called Aussie traded at $1.0979 from $1.0971 yesterday, after rising as high as $1.1008. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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