By Yoshiaki Nohara and Ron Harui Aug. 27 (Bloomberg) -- The yen fell, reversing earlier gains versus the euro and the dollar, on speculation Japanese policy makers will take measures to halt the currency’s advance. Japan’s currency weakened versus 15 of its 16 major counterparts after the government’s top spokesman said Prime Minister Naoto Kan will speak today on his policies to fight deflation and curb the yen’s strength. The dollar headed for a second weekly loss against the Swiss franc on speculation Federal Reserve Chairman Ben S. Bernanke will signal the central bank keep interest rates near zero to spur growth. “Japan’s policy makers need to do something to show the market their resolve on the yen, as there’s a lot more they can do such as monetary easing,” said Marito Ueda, senior marketing director at FX Prime Corp., a foreign-exchange margin company in Tokyo. Speculation about Kan’s initiative “is halting the yen’s strength, but there’s a risk for the currency to rise again if he disappoints the market.” The yen fell to 107.83 per euro as of 6:54 a.m. in London from 107.39 in New York yesterday, after earlier rising as high as 106.99. Japan’s currency dropped to 84.73 per dollar from 84.45, heading for a 1 percent gain this week. The dollar was at 1.0242 francs from 1.0240, set for a 0.9 percent loss this week. The greenback traded at $1.2726 per euro from $1.2716. Japan’s currency also dropped after the Nikkei 225 Stock Average rose 1.1 percent after falling as much as 1.1 percent earlier, and the MSCI Asia Pacific Index of regional shares climbed 0.4 percent following a decline as large as 0.4 percent. Japanese Economic Ministers Kan’s economic ministers will meet today to discuss the policies, including strengthening ties with the Bank of Japan, Chief Cabinet Secretary Yoshito Sengoku told reporters in Tokyo. The ministers agree on the need to curb the currency’s advance as soon as possible, he said. Finance Minister Yoshihiko Noda also said today the nation’s currency situation is “severe” and reiterated the government is prepared to take appropriate action when necessary. Japan’s currency has advanced 15 percent this year in the biggest gain among developed-world counterparts, according to Bloomberg Correlation-Weighted Currency Indexes. The euro has dropped 9 percent, and the dollar is up 3.8 percent. Every one-yen advance against the dollar reduces Toyota Motor Corp.’s annual operating profit by 30 billion yen ($354 million), according to the company. “In the next three to six months, Japan’s yen will likely remain much stronger to the U.S. dollar,” said Yasuhiro Matsumoto, a senior analyst in Tokyo at Shinsei Securities Co., in a Bloomberg Television interview. “That will put some downward pressure on Toyota’s earnings.” U.S. Report The dollar headed for a second weekly loss versus the yen before a U.S. report today that may show the recovery of the world’s largest economy is faltering. The U.S. economy grew at a 1.4 percent annual pace last quarter, the weakest in the recovery that began last year, according to a Bloomberg survey before today’s Commerce Department report. Sales of new homes unexpectedly dropped in July to the lowest level on record, a separate Commerce Department report showed on Aug. 25. Bernanke, who speaks today at an annual Fed symposium in Jackson Hole, Wyoming, is likely to elaborate on how much Fed officials or staff economists have cut their forecast for 2011 growth, Paul McCulley, managing director at Pacific Investment Management Co., said yesterday in a Bloomberg Radio interview. “Recently extreme weak economic data have increased the odds of a second round of quantitative easing,” said Steven Englander, head of Group-of-10 currency strategy at Citigroup Inc. in New York, in an investor note. “Further expansion of the Fed’s balance sheet and more direct efforts at reflating the U.S. economy will likely put downward pressure on the dollar.” Fed Rate Bets Futures on the CME Group exchange show a 31 percent chance the Fed will cut the target rate for overnight bank lending to zero by its November meeting, up from a 25 probability a month ago. The central bank’s benchmark interest rate is in a range from zero to 0.25 percent. The Korean won fell, heading for a weekly decline, on concern that the economic recovery in the U.S., South Korea’s second-largest export market, is faltering. The won has dropped the most in the past five days among Asia’s 10 most-active currencies as overseas investors sold $143 million more of South Korean shares than they bought this week through yesterday. “There’s a lot of uncertainty being imported from the U.S., and the picture remains one of nervousness on the potential impact of the U.S. slowdown on Asia,” said Robert Minikin, a senior foreign-exchange strategist at Standard Chartered Plc in Hong Kong. The won fell 0.4 percent to 1,195.25 per dollar, declining 1 percent this week. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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