Yen Declines After Hatoyama Says Currency Can’t Be Left as Is

By Lukanyo Mnyanda

Dec. 2 (Bloomberg) -- The yen fell after Japanese Prime Minister Yukio Hatoyama was cited by the Nikkei newspaper as saying the currency’s strength can’t be left as it is, fueling speculation the central bank will intervene to stem its gains.

Japan’s currency headed for its first back-to-back losses in two weeks against the dollar following the Nikkei report. Chief Cabinet Secretary Hirofumi Hirano said later Hatoyama wasn’t suggesting the government is ready to intervene. The dollar traded near a 16-month low versus the euro and fell against higher-yielding currencies as stock markets rose.

“They are very much concerned about yen strength, and the market is quite aware that the Bank of Japan will likely intervene if the yen appreciates too much,” said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-largest lender. “Risk appetite is also driving the market at the moment and the dollar will also be under pressure due to the low financing costs.”

The yen dropped 0.6 percent to 87.22 per dollar as of 8:24 a.m. in London. It declined 0.7 percent to 131.69 per euro. The dollar fell 0.2 percent to $1.5088 per euro. It depreciated to $1.5144 on Nov. 25, the weakest level since August 2008.

The yen has advanced 3.8 percent versus the dollar this year and traded at a 14-year high of 84.83 against the U.S. currency on Nov. 27. Rapid fluctuations in the currency market are undesirable and the government is closely monitoring the situation, Hirano told reporters in Tokyo following Hatoyama’s comments.

Aussie Dollar

The yen fell against all its 16 most-traded peers tracked by Bloomberg, including the Australian and New Zealand dollars. Australia’s currency, the Aussie, rose as gold, the nation’s third most-valuable raw material export, advanced to a record for a second day, trading at $1,215.85 an ounce.

The Aussie rose 0.9 percent to 80.92 yen and was up 0.3 percent against the dollar at 92.78 cents. The New Zealand dollar gained 1 percent to 63.53 yen and strengthened 0.3 percent to 72.81 cents.

The dollar also declined before a report economists said will show U.S. employers fired fewer workers last month, giving investors confidence to buy assets that offer higher returns.

Benchmark interest rates are 3.75 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

Stocks Rise

Most European stocks advanced, with the Dow Jones Stoxx 600 Index adding 0.1 percent, after jumping 2.7 percent yesterday. The MSCI World Index headed for a third day of increases.

U.S. companies cut 150,000 jobs in November, down from 203,000 in October, according to the median estimate of economists in a Bloomberg News survey before today’s report from ADP Employer Services. That would be the smallest reduction since July 2008.

“The global recovery is in motion,” said Adam Carr, senior economist at ICAP Australia Ltd. in Sydney. “A stronger employment report, of course, will lead to an increase in risk appetite, and we will probably see that weigh heavily on the U.S. dollar.”

The euro rose against the yen as European finance leaders played down potential risks to their banks from Dubai’s debt problems. Government-related Dubai World has begun talks with banks to restructure $26 billion of debt.

The risk of losses for “European banks seems to be so far, from what we can assess, at a reasonable level,” Finance Minister Anders Borg of Sweden, which holds the rotating European Union presidency, said yesterday as he arrived for a meeting of finance chiefs in Brussels.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net