The yen weakened for a second day against the euro as a Japanese report showed the decline in exports accelerated, boosting speculation the nation’s investors will funnel their summer bonuses overseas. The yen fell versus all of the 16 major currencies as Asian stocks rose, spurring demand for higher-yielding assets. The dollar traded near a one-week low against the euro on prospects the Federal Reserve will today signal it intends to refrain from raising interest rates this year to revive economic growth. Asian currencies strengthened as the outlook for low U.S. interest rates spurred demand for higher-yielding assets. “The Japanese data suggest the economy is still not doing that well, which could be negative for the yen,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Trust funds which invest abroad are likely to be marketed with an aim to lure summer bonuses. This would be a yen-selling factor.” The yen declined to 134.51 per euro as of 6:49 a.m. in London from 134.04 in New York yesterday, when it rose to 131.43, the strongest level since May 22. Japan’s currency dropped to 95.55 per dollar from 95.22. The dollar was at $1.4079 per euro from $1.4077 yesterday, when it fell to $1.4108, the weakest since June 12. The yen has fallen 2.5 percent versus the euro so far this quarter and dropped 5.9 percent this year. Japan’s currency advanced 3.5 percent since April 1 against the greenback, while weakening 5.2 percent this year. The Nikkei 225 Stock Average rose 0.6 percent and the MSCI Asia Pacific Index of regional shares advanced 0.9 percent. Falling Exports Japan’s currency extended this year’s losses after the Finance Ministry said exports dropped 40.9 percent in May from a year earlier, after falling 39.1 percent in April. Imports slid 42.4 percent from a year ago, more than the 41.1 percent decrease in April. The world’s second-largest economy will take some time to recover, Bank of Japan board member Seiji Nakamura said today in Niigata, northwestern Japan. The central bank should keep buying corporate assets and providing banks with ample funds as long as such “extraordinary” policies are needed, Nakamura said. Large companies in Japan will pay this month an average of 754,009 yen ($7,900) in summer bonuses, according to data from the Japan Business Federation. Japanese firms pay bonuses twice a year as part of their overall compensation packages. The greenback fell the most in six weeks against the euro yesterday as traders added to bets the Federal Open Market Committee will keep the benchmark rate unchanged at 0.25 percent through December. ‘Looking for Guidance’ “People are looking for guidance on what the Fed thinks about green shoots,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Probably right after the Fed’s statement, the U.S. dollar will stay weak. But I’m not convinced it will weaken indefinitely.” The Fed will probably keep its interest-rate target for overnight loans between banks close to zero and maintain its $300 billion program of Treasury purchases, according to a Bloomberg News survey of economists before today’s statement. Interest-rate futures indicated a 40 percent chance the U.S. central bank will increase its target rate to at least 0.5 percent by December, down from 50 percent odds a week ago. Losses in the dollar were tempered after Moody’s Investors Service said the greenback’s unchallenged status as the world’s reserve currency is supporting U.S.’s Aaa credit rating. ECB Officials The euro also gained versus the yen on speculation a European Central Bank official will today signal the central bank plans to refrain from cutting interest rates, maintaining the allure of Europe’s single currency. ECB council member Axel Weber said yesterday policy makers have already used up their room to lower borrowing costs. Fellow member Miguel Angel Fernandez Ordonez said the central bank’s benchmark interest rate of 1 percent is “appropriate” and “correct,” indicating the euro-area’s rate will stay higher than the U.S. benchmark. “Several ECB officials have stressed in the last few sessions that policy rate cuts may well be at an end,” analysts led by Callum Henderson, Singapore-based global head of currency strategy at Standard Chartered Bank, wrote in a research note today. “We look for a bounce” in the euro against the dollar, the note said. South Korea’s won and the Philippine peso led Asian currencies higher on speculation the nations’ assets will retain their interest-rate advantage over U.S. securities. ‘Extra Liquidity’ “Low dollar interest rates mean there’s going to be extra liquidity that may find its way into this region to chase high returns,” said Vishnu Varathan, a regional economist at Forecast Singapore Pte Ltd. “If policy continues to be conducive, that will help the U.S. recovery, which is good news for emerging-market Asia because we are exporting to the U.S.” The won rose 0.7 percent to 1,282.35 per dollar and the peso gained 0.5 percent to 48.228. The yen may rise to 90 per dollar as overseas investors are drawn to the world’s second-biggest economy after Japan reported its fastest industrial output growth for 56 years, according to Credit Suisse Group AG. Japan’s main gauge of manufacturing and mining may have grown 8.8 percent last month, based on businesses surveyed by the Trade Ministry, accelerating from April’s 5.9 percent jump. The yen rose this quarter as output soared, snapping previous patterns where production declines prompted currency gains as concerns about global growth boosted demand for safer assets. “Japan’s manufacturing is growing again and that may lead investors to a re-evaluate the yen,” said Satoru Ogasawara, an economist at Credit Suisse in Tokyo.

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