The yen fell to its lowest in 2 1/2 years against the dollar and euro amid speculation Prime Minister Shinzo Abe is nearing selection of a new Bank of Japan (8301) governor who will boost monetary stimulus to spur inflation. Japan’s currency weakened past 92 per dollar after data today showed an increase in the nation’s jobless rate and a decline in household spending, adding to impetus for further easing to bolster growth. The euro rose to a 14-month high against the greenback before reports that may confirm manufacturing improved in the 17-nation region. Australia’s dollar fell after factory output in China, the nation’s biggest trading partner, expanded at a slower-than-expected pace. “All the data prints we’ve been seeing from Japan continue to show signs of weakness, suggesting a lot needs to be done to drive this economy out of deflation,� said Stan Shamu, a markets strategist with IG Markets Ltd. in Melbourne. “They need to bring in someone who’s very aggressive, so every time dollar-yen dips it’s finding buyers.� The yen sank 0.5 percent to 92.20 per dollar as of 1:52 p.m. in Tokyo, after earlier touching 92.27, the weakest since June 2010. It slid to 125.72 per euro, the least since May 2010, before trading at 125.59, 0.8 percent lower than yesterday’s close. The yen is set for a 1.4 percent loss in the past five days against the dollar, marking a 12th weekly loss that’s the longest stretch in Bloomberg data going back to 1971. Europe’s shared currency rose 0.3 percent to $1.3623, after touching $1.3633, the strongest since November 2011. Yesterday it completed the longest stretch of monthly advances against the dollar since May 2003. Narrowing List Japanese Economy Minister Akira Amari told reporters in Tokyo today that Abe may be narrowing the list of candidates to replace BOJ Governor Masaaki Shirakawa, whose term ends in April. Amid government pressure, the central bank last month doubled its inflation target to 2 percent and announced open- ended asset purchases to begin next year. Kikuo Iwata, a Gakushuin University economics professor and a potential candidate to be the next BOJ governor, told lawmakers yesterday that deflation and the strong yen can be overcome with monetary policy alone. Japan’s Labor Force Survey showed the nation’s unemployment rate climbed to 4.2 percent in December from 4.1 percent in the previous month. A separate report indicated spending among households fell 0.7 percent in the same period from a year earlier. The yen has fallen 7 percent since the end of last year, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar lost 0.5 percent and the euro climbed 3.1 percent. Exceeding Expectations The final reading for a gauge of euro zone factory output by Markit Economics will probably show a gain to 47.5 in January from 46.1 in the previous month, according to the median estimate of economists surveyed by Bloomberg News. A level below 50 indicates contraction. “Positive sentiment towards the euro has exceeded even our own robust expectations and we believe this trend will continue,� Steven Saywell, the London-based head of currency strategy for Europe at BNP Paribas SA, wrote in a note to clients yesterday. The bank sees the currency at $1.38 by year- end, up from a previous estimate of $1.32, according to the report. In China, the manufacturing Purchasing Managers’ Index fell to 50.4 last month from 50.6 in December. That compared with economist estimates for a gain to 51. A similar gauge from by HSBC Holdings Plc and Markit rose to 52.3 in January from 51.5 a month earlier. The Australian dollar lost 0.4 percent to $1.0384. To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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