The yen fell to the lowest level in three weeks against the euro and two weeks versus the dollar on speculation central banks in Europe and the U.S. are closer to removing stimulus as the global economy recovers. Japan’s currency weakened against all of its major counterparts as the European Central Bank member Jozef Makuch said it is “highly probable” that the bank will raise interest rates next week. St. Louis Federal Reserve President James Bullard said signs of an improving economy may lead the central bank to curtail debt buying. South Korea’s won was the best performer against the yen after its current account surplus widened. “General economic recovery is turning out to be bullish for the dollar and pressuring the yen,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC in Greenwich, Connecticut. “Bullard is going all out and possibly pushing the envelope on creating a rethink in the market place for the Fed’s eventual exit strategy. There’s no way the Japanese are putting up interest rates as far as the eye can see.” The yen declined 0.8 percent to 82.34 per dollar at 9:53 a.m. in New York, from 81.69 yesterday. The Japanese currency weakened 0.7 percent to 115.87 per euro. Europe’s shared currency traded at $1.4068, compared with $1.4087, after rising as much as 0.4 percent. Downgrade Update The euro remained lower against the dollar after Standard & Poor’s Ratings services lowered Portugal’s sovereign credit ratings to BBB-/A-3. BBB- is the lowest investment grade. Greece was also cut by S&P to BB- from BB+ and its outlook remains negative. The yen is headed for a 6.1 percent drop against the euro and a 1.3 percent decline against the dollar this quarter. “There’s no real pressure on the Bank of Japan to tighten policy, they are still grappling with deflation,” said Lee Hardman, a strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Over the next 12 months we expect the yen to weaken against the other major currencies as the other major central banks outside Japan move to gradually withdraw loose monetary policy.” Makuch, who also heads the National Bank of Slovakia, declined at a press conference in Bratislava today to comment on how much rates might be changed and whether it could be the start of a series of moves. Euro Pattern Europe’s common currency has strengthened 5.1 percent versus the dollar this year and 6.5 percent against the yen as euro-region policy makers stiffened their anti-inflation stance. The U.S. economy grew at a 3.1 percent annual rate in the fourth quarter, led by a jump in consumer spending, the Commerce Department reported March 25. Earnings at financial firms led a 2.3 percent increase in corporate profits from October to December that capped the biggest annual gain in six decades. The Fed’s Bullard said the central bank may be able to cut about $100 billion from its plan to buy $600 billion Treasury securities through June. “The Federal Open Market Committee may not be willing or able to wait until all global uncertainties are resolved to begin normalizing policy,” Bullard said according to a statement on remarks he was to deliver at a financial forum in Prague today. Dollar Index The Dollar Index, used to track the currency against six major U.S. trading partners, rose 0.3 percent to 76.328, trimming its quarterly fall to 3.4 percent. “We’re looking at a whole array of Fed speakers starting to sound more hawkish,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York in an interview on Bloomberg Radio’s “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “The dollar is probably going to have its best days against other low-yielding currencies, such as the yen and Swiss franc.” Franulovich said he sees the yen weakening to between 85 and 90 per dollar. South Korea’s won was supported by a central bank report showing the current-account surplus widened to $1.18 billion in February, from $154.7 million in January. The won appreciated 0.4 percent to 1,110.25 per dollar, the strongest level since Feb. 10. It rose 0.9 percent to 7.404 per yen, the strongest in two weeks. ECB Stance The ECB will lift its main refinancing rate by 25 basis points to 1.25 percent at its April 7 meeting, according to the median forecast of 19 economists in Bloomberg News survey. Europe’s rate will reach 1.75 percent by the end of this year, up from the current record low 1 percent, while the Federal Reserve will lift rates in the first quarter of next year and the Bank of Japan will leave its key interest rate unchanged, separate surveys show. The implied yield on the three-month Euribor contract expiring in December rose one basis point to 2.08 percent today, up from 1.33 percent at the beginning of the year, as investors added to bets that interest rates will rise. U.S. employers added 190,000 jobs in March, economists forecast before the Labor Department’s April 1 payrolls report. The unemployment rate may have stayed at 8.9 percent. “For the Fed, what’s really important is payrolls and the employment picture,” Bilal Hafeez, London-based head of foreign-exchange strategy at Deutsche Bank AG, said in an interview with Maryam Nemazee on Bloomberg Television’s “The Pulse.” He said the Fed will raise borrowing costs at the end of this year “at the earliest.” To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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