Speculation on stimulus plan pushes yen down

The yen weakened against all of its major counterparts yesterday amid speculation the central bank will boost monetary stimulus. The dollar fell to a 10-month low versus the euro while commodities rose, led by gains in corn and oil.

The yen lost 0.5 percent to 89.63 per dollar at 12:54 a.m. in Tokyo yesterday, trading at its lowest level since June 2010. The dollar touched $1.3404 per euro, the weakest since Feb. 29.

Bank of Japan Gov. Masaaki Shirakawa will address a meeting of branch managers today after Prime Minister Shinzo Abe said he is seeking a “bold policy leader” as the next central bank chief. Federal Reserve Chairman Ben Bernanke speaks today about monetary policy before data this week that may show growth in retail sales slowed, manufacturing in the New York region failed to expand and inflation remained in check.

“There’s a lot more pressure for the Japanese government to end deflation,” said Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors, which manages almost $100 billion. “They’re starting to get a lot more aggressive, and this has resulted in the yen’s decline. If the yen continues to weaken, Japanese exporters will regain some market share from Korean rivals.”

The yen fell 0.9 percent to 120.07 per euro, the weakest since May 2011. The Japanese currency last week capped a ninth weekly loss against the dollar, the longest stretch since 10 weeks ended in February 1989, after Abe announced a 10.3 trillion yen ($115 billion) spending package to drive a recovery. The Bank of Japan meets Jan. 21-22.

“Abe announced fiscal stimulus in Japan, which is what sent the yen lower against the dollar,” Richard Franulovich, a senior currency strategist at Westpac Banking in New York, said in a telephone interview. “We were expecting some sort of fiscal program, and they basically put some flesh on the bone.” Bloomberg