The yen fell versus the dollar and the euro on speculation Japan sold its currency after intervening in the foreign-exchange market last week for the first time in six years. Japan’s currency slid 1 percent in about 10 minutes as Kyodo News cited an unidentified market source as saying Japan sold the yen today to protect exporters. Finance Minister Yoshihiko Noda said earlier today the government will take “bold” action if necessary to curb excessive movements in the yen that may hurt the economy. The dollar dropped against the euro, extending a second weekly decline, on concern the Federal Reserve is moving closer to boosting debt purchases. “There’s rumors of intervention,” said Adrian Foster, head of financial-markets research for Asia at Rabobank Groep NV in Hong Kong. “The low 80s appear to be their broad line in the sand. They’ve got an awful lot of bullets to fire.” The yen dropped 0.6 percent to 84.90 per dollar as of 7:01 a.m. in London from 84.38 in New York yesterday, after earlier falling as much as 1.1 percent, the most since Japan intervened on Sept. 15. The currency weakened 0.8 percent to 113.22 per euro. The dollar fell to $1.3335 per euro from $1.3314. Japan’s currency has gained 1 percent since the nation’s intervention on Sept. 15 pushed the yen down to a one-month low from the strongest level in 15 years. The yen also weakened as Reuters reported that Bank of Japan Governor Masaaki Shirakawa may resign. The central bank later denied the speculation, saying Shirakawa had no plans to step down. ‘Aggressively Intervene’ Japan “will again aggressively intervene in the foreign- exchange markets to prevent further yen strength,” Calvin Tse, a currency strategist at Morgan Stanley in New York, wrote in a research note yesterday. “If they intervene with enough vigor, this may prompt many market participants, who are currently very long yen, to unwind their positions.” Morgan Stanley forecasts the yen will weaken to 93 per dollar by year-end, according to the note. The dollar fell versus the euro before Fed Chairman Ben S. Bernanke speaks at Princeton University today on lessons from the global financial crisis. Bernanke and his fellow policy makers said Sept. 21 they were willing to do more to spur growth and support prices, indicating they may add securities to the Fed’s holdings, a measure known as quantitative easing, or QE. “The Fed’s emphasis on low inflation means the market will continue to speculate on a new round of quantitative easing beginning perhaps as soon as November,” said Imre Speizer, a market strategist in Wellington, New Zealand, at Westpac Banking Corp. “That will keep the dollar under pressure.” Nomura Forecast Nomura Holdings Inc. yesterday forecast the dollar would weaken by year-end and into 2011 on expectations the Fed will extend purchases of Treasuries into the fourth quarter. The company lowered its projection for the dollar to end 2010 at $1.35 per euro, compared with $1.25. Nomura forecast the greenback at 1.04 Swiss franc, compared with 1.12. “European currencies are likely to respond the most, especially now that Japan has started to intervene to reduce strengthening pressure on the yen,” analysts led by Jens Nordvig, managing director of currency research at Nomura in New York, wrote in a note. Futures on the Chicago Mercantile Exchange show a 62 percent chance the Fed will keep its target rate for overnight bank lending between zero and 0.25 percent through its June 2011 meeting, compared with a 52 percent probability a month ago. Ireland’s Banks Gains in the euro were tempered on concern Ireland’s banking crisis will worsen, diminishing the appeal of assets in the 16-nation region. The cost to insure Ireland’s debt climbed to a record yesterday on speculation Anglo Irish Bank Corp. won’t pay back bondholders in full. “There are worries over Ireland and equities are falling,” said Satoshi Okagawa, head of the foreign exchange and money trading group in Singapore at Sumitomo Mitsui Banking Corp., a unit of Japan’s third-largest banking group. “This may be leading to euro selling.” Investors are fleeing Irish bonds on concern bank bailout costs and a shrinking economy will hinder efforts to curb the European Union’s largest budget deficit. Government guarantees covering some of the subordinated debt sold by the nation’s banks come to an end next week. Contracts on default protection for Irish debt rose 10 basis points to 476 basis points yesterday, according to CMA. To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net. To contact the editor responsible for this story: Nicholas Reynolds at nreynolds2@bloomberg.net.

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