Yen Declines as Japan’s Kan Says He Supports a Weaker Currency

By Bo Nielsen and Yasuhiko Seki

Jan. 7 (Bloomberg) -- The yen fell against the dollar and the euro after Japanese Finance Minister Naoto Kan said on his first day in office that he backs a weaker currency.

The Japanese currency also declined versus 11 of the 16 most-traded currencies after Kan said in his inaugural press conference that he will try to keep the yen at an “appropriate level”. The Australian dollar rose to a 25-year high versus the pound after a report showed retail sales surged the most in eight months in November, fanning speculation the central bank will raise interest rates.

“It’s clear that Kan is going to say what he thinks and he thinks the yen should weaken,” said Neil Mellor, a currency strategist at BNY Mellon Corp. in London. “He seems to have reverted back to the old weak-yen policy.”

The yen dropped to 92.69 per dollar as of 8:49 a.m. in London from 92.32 yesterday in New York. The Japanese currency slipped to 133.13 per euro from 133.01, after earlier climbing to 132.40. The dollar rose to $1.4362 per euro from $1.4408.

Kan said today in Tokyo that he will seek to keep the yen at “an appropriate level while considering various impacts on the economy that may be caused by currencies.” While the yen has fallen since reaching a 14-year high in November, “I hope it will correct a bit more,” he said.

The yen surged to 84.83 per dollar on Nov. 27, the strongest since July, 1995, after Kan’s predecessor, Hirohisa Fujii, said he didn’t support a weak yen and opposed “easy intervention.” The Japanese currency has fallen 9.3 percent since then.

‘Clear Difference’

“It was reconfirmed that Kan doesn’t want a rising yen to hurt the economy in a clear difference from his predecessor,” said Keiji Matsumoto, a strategist in Tokyo at Nikko Cordial Securities Inc. “It is apparent that Kan won’t tolerate a stronger yen.”

The Australian dollar touched 1.7310 per U.K. pound, the strongest in 25 years, and traded up 0.5 percent at 1.7330 as retail sales climbed 1.4 percent from October, when they gained a revised 0.4 percent, the Bureau of Statistics said in Sydney today. The median forecast of 12 economists surveyed by Bloomberg News was for a 0.3 percent gain.

“There’s only good news coming out of Australia,” said Ray Farris, the London-based head of FX strategy at Credit Suisse Group AG to Bloomberg Television. “We like the Australian dollar.”

Interest Rates

The Bank of England will probably keep benchmark rates at 0.5 percent at a meeting today in London, according to a Bloomberg survey. Japan’s benchmark rate is 0.1 percent and the U.S.’s is zero to 0.25 percent. Australia’s key rate is 3.75 percent.

The dollar rose against the euro before a report tomorrow that may show U.S. employers didn’t cut jobs in December for the first time since the recession started. Nonfarm payrolls were unchanged after falling 11,000 the prior month, according to the median estimate of 74 economists in a Bloomberg survey.

The MSCI Asia Pacific index fell 0.4 percent and the Dow Jones Stoxx 600 Index of European shares fell 0.2 percent, after China took steps to remove economic stimulus. The central bank sold three-month bills at a higher interest rate for the first time in 19 weeks after saying its focus for 2010 is controlling the record expansion in lending and curbing price increases.

“The Chinese central bank’s action came as a negative surprise,” said Kumiko Gervaise, a Tokyo-based currency analyst at Gaitame.com Research Institute Ltd., a unit of Japan’s biggest currency margin trader. “Higher-yielding currencies showed a knee-jerk reaction to this news, and the safe-haven currencies were bought back.”

To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net