The yen and Swiss franc weakened against most of their major counterparts amid speculation policy makers in Japan and Switzerland will take further action to stem gains in their currencies. The yen dropped against the euro after Japanese Finance Minister Yoshihiko Noda indicated he’s ready to intervene in markets again. The franc fell versus the dollar for a fourth day after the SonntagsZeitung newspaper said the Swiss government and the central bank are in “intense” talks over setting a target for their currency. The Australian and New Zealand dollars climbed as gains in Asian stocks supported demand for higher yielding assets. “The market is going to be very reluctant to be buying yen and to be buying Swiss when central bank intervention is at risk and when equity markets are buoyant,” said Kurt Magnus, executive director of currency sales at Nomura Holdings Inc. in Sydney. The Japanese currency declined to 110.08 per euro as of 6:42 a.m. in London from 109.30 on Aug. 12 in New York. It traded at 76.96 per dollar from 76.71 last week, when it reached 76.31, near its post-World War II high of 76.25 set on March 17. The 17-nation euro rose to $1.4301 from $1.4248. The franc plunged 2.4 percent to 1.1353 per euro and 2 percent to 79.38 centimes per dollar. The MSCI Asia Pacific Index of regional shares climbed 1.7 percent. Futures for September delivery on the Standard & Poor’s 500 Index showed the gauge may increase 0.7 percent. The index rose 0.8 percent in New York on Aug. 12. The so-called Aussie climbed 0.7 percent to $1.0431 and the New Zealand dollar also added 0.7 percent to 83.83 U.S. cents. ‘Bold Action’ The franc soared 11 percent in the past three months while the yen added 3.2 percent, according to Bloomberg Correlation- Weighted Indexes, as debt crises in Europe and the U.S. boosted demand for the currencies as a refuge. “An unstable situation is continuing,” Noda said yesterday during a television talk show on public broadcaster NHK. “As foreign-exchange market matters are my prerogative, I will continue to closely watch the markets and take bold action if it becomes necessary.” The yen has risen beyond the level that prompted Japan to sell the currency on Aug. 4, its first intervention in currency markets since March. A stronger yen reduces the value of overseas income at Japanese companies when converted into their home currency. Japan’s economy shrank at a 1.3 percent annual pace in the three months through June, the third-straight quarter of contraction, government data showed today. The median forecast of 25 economists surveyed by Bloomberg News was for a 2.5 percent drop. Currency Target The Swiss National Bank may set a target for the currency in “coming days,” SonntagsZeitung reported. Talks are focusing on the role of the government and an “appropriate plan” may be adopted on Aug. 17, the newspaper said. SNB policy makers, led by Philipp Hildebrand, have been seeking ways to stop the franc’s ascent to near parity with the euro. While the central bank boosted liquidity in money markets and cut borrowing costs to zero, lawmakers have signaled their support for tougher measures to protect the economy. “The market is paying much more respect towards the idea that there’s some sort of shock-and-awe tactic being put together in Switzerland,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest lender. “It’s this fear of the unknown that has sparked a significant move” in the Swiss franc. Aussie, Kiwi The euro rose for a third day versus the dollar on speculation tomorrow’s meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel in Paris will spur action to contain the region’s debt crisis. The two leaders “will come out with something,” said Alex Sinton, senior dealer at ANZ National Bank Ltd. in Auckland. “It may even be long-term viable. I suspect there’ll be a range broken this week.” Investors will be looking to sell the euro on rallies toward $1.44, Sinton said. European Union Economic and Monetary Commissioner Olli Rehn doesn’t see Italy, Spain or France requiring aid as these countries are taking “the right steps” to balance their budgets and spur economic growth, he said according to an interview with Germany’s Bild Zeitung. Dollar Bets Foreign-exchange traders slashed bets against the dollar by the most on record as demand for U.S. Treasuries soared amid global growth concerns. Aggregate bets the greenback will weaken against the euro, the yen, the Australian, Canadian and New Zealand dollars, the pound, the Swiss franc and the Mexican peso plunged by 154,105 contracts to 153,216 in the week ended Aug. 9, the biggest drop ever in Commodity Futures Trading Commission data compiled by Bloomberg beginning in November 2003. “The selloff in risk assets is due to the repricing of global growth,” said Ray Attrill, head of currency strategy at BNP Paribas SA in New York. “The volatility levels have just been off the scale in foreign exchange, and that has deterred people from taking up the Fed’s invitation to use the dollar as a funding vehicle for risk appetite.” The Federal Reserve said in its Aug. 9 statement that it’s prepared to use a range of policy tools to boost the economy, including keeping its benchmark interest rate near zero through mid-2013. The pledge is positive for the U.S. government, Moody’s Investors Service said in its weekly credit outlook. To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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