BLBG:Yen Falls on Chinese Manufacturing, North Korea Threat
The yen weakened as signs of strengthening manufacturing in China damped demand for the relative safety of Japan’s currency, while North Korea’s threat to test nuclear weapons sapped appetite for the region’s assets.
The yen extended declines after Japan’s Deputy Economy Minister Yasutoshi Nishimura said its correction from strong levels “isn’t over yet.” Japan posted a bigger-than-estimated trade deficit and data tomorrow may show consumer prices fell the most since August. The euro failed to rally after the International Monetary Fund cut global growth forecasts and projected a second year of contraction in the currency bloc.
“Yen selling accelerated after the Chinese data,” said Yuji Saito, the director of the foreign-exchange department in Tokyo at Credit Agricole SA. (ACA) “The weakness in the yen has been reinforced as the market is selling Asian assets amid rising geopolitical risks in North Korea.”
The yen lost 0.8 percent to 89.33 per dollar as of 2:53 p.m. in Tokyo after gaining 1.7 percent in the previous three days. The Japanese currency reached 90.25 on Jan. 21, the weakest level since June 2010. It fell 0.8 percent to 118.96 per euro from yesterday. The dollar was little changed at $1.3317 per euro.
HSBC Holdings Plc and Markit Economics said today the preliminary reading of China’s Purchasing Managers’ Index rose to 51.9 in January from the 51.5 final reading for December and the 51.7 median estimate of analysts surveyed by Bloomberg News.
Nuclear Threat
North Korea threatened to conduct a nuclear weapons test “targeted” at the U.S. after the Obama administration pushed through new United Nations sanctions against the state for its rocket launch last month.
The Shanghai Composite Index of shares lost 0.3 percent and South Korea’s Kospi Index dropped 0.8 percent.
Japan’s Nishimura said a yen at 100 to the dollar wouldn’t be a problem, suggesting global criticism may fail to convince Prime Minister Shinzo Abe to temper his campaign to weaken the currency. Nishimura spoke in an interview in Tokyo today.
Japanese imports exceeded exports by 641.5 billion yen ($7.2 billion) last month, compared to a 954.8 billion yen gap in November, the Ministry of Finance said today. Exports dropped by more than forecast, and the annual trade deficit was a record 6.93 trillion yen, the data showed.
Price Decline
Japanese consumer prices excluding fresh food probably fell 0.2 percent in December from a year earlier, economists said before the figures due tomorrow. The Bank of Japan (8301) this week increased its inflation target to 2 percent and announced open- ended asset purchases to start next year.
“There is very little substance in terms of the BOJ’s agreement to policy action that backs up its commitment to the inflation target or provides an underpinning for a move weaker in the yen,” said Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney.
The world economy will expand 3.5 percent this year, less than the 3.6 percent forecast in October, the Washington-based IMF said yesterday in an update of its World Economic Outlook report. It expects the 17-country euro area to shrink 0.2 percent in 2013, instead of growing 0.2 percent as forecast in October.
To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
