By Matthew Brown and Yoshiaki Nohara
Sept. 28 (Bloomberg) -- The yen touched the highest level in eight months against the dollar on speculation Japan’s new government will allow its currency to appreciate.
The dollar fell below 89 yen for the first time since February after Finance Minister Hirohisa Fujii said the Japanese currency’s moves aren’t excessive, and the greenback pared losses after Fujii said people misinterpreted his comments. The euro fell against the dollar before a German report forecast to show consumer prices dropped for the first time in four months.
“While the Democratic Party of Japan has made it clear that it is against the idea of currency intervention, it seems they’ve been surprised by how seriously the market has taken their comments and are softening their rhetoric,” said Simon Derrick, chief foreign-exchange strategist at BNY Mellon Corp. in London.
The yen gained 0.3 percent to 89.33 per dollar at 7:32 a.m. in New York, from 89.64 on Sept. 25. It earlier touched 88.24, the strongest level since Jan. 23. The yen appreciated 0.6 percent to 130.98 per euro, from 131.70, after earlier reaching 129.83, the strongest since July 14. The dollar appreciated 0.2 percent to $1.4661 per euro, from $1.4689.
Fujii said on Sept. 16 he doesn’t support a “weak yen,” fueling speculation the government won’t act to curb the currency’s 19 percent appreciation versus the dollar in the past year. Central banks intervene in foreign-exchange markets by selling and buying currencies.
Yen Intervention
Speaking today at a forum co-hosted by Bloomberg, Fujii said he “never said I will leave the yen to strengthen” and that he didn’t necessarily accept gains in the currency. Fujii’s Democratic Party of Japan swept to power in elections on a platform of boosting public consumption.
Losses in the euro were tempered after German Chancellor Angela Merkel said she will press ahead with tax cuts and labor- market deregulation after winning re-election with enough support to govern with the pro-business Free Democrats.
Group of 20 leaders, meeting in Pittsburgh last week, adopted a framework for more durable economic growth as they sought to prevent a replay of the worst crisis since the Great Depression. They acknowledged the recovery remains dependent on emergency government measures and pledged to avoid pulling back until the time is right.
To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
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