The yen surpassed the previous high set last week, prompting Japanese Finance Minister Jun Azumi to say he's ready to take "determined" steps in the currency market. The dollar dropped versus all of its 16 major peers this month amid speculation the Federal Reserve may add to stimulus measures. The euro weakened before figures that may show the region's inflation slowed in October, spurring prospects of an interest- rate cut by the European Central Bank this week.
"The Bank of Japan didn't intervene in currency markets last week and that's been taken by the market as a signal to further strengthen the yen," said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington.
The yen advanced as much as 0.6 percent to a record 75.35 per dollar before trading at 75.73 at 9:51 a.m. in Tokyo from 75.82 in New York on Oct. 28. It rose 0.1 percent to 107.15 per euro. Japan's currency is set for a 1.7 percent gain versus the greenback and a 3.7 percent drop against the euro this month.
The dollar traded at $1.4148 per euro from $1.4147, set for a 5.4 percent decline in October.
Azumi told reporters in Tokyo today that speculative activity is strong in the currency market and the yen's moves don't reflect Japan's economic fundamentals. The BOJ increased asset purchases by 5 trillion yen ($66 billion) because of concern about the yen's appreciation and the European debt crisis, Governor Masaaki Shirakawa said on Oct. 27.
Fed Easing Prospects
The dollar is set for its first monthly decline against the euro since June on speculation weakening economic data may spur another round of monetary easing from the Fed.
The Institute for Supply Management-Chicago Inc. will say today its business barometer fell to 59 this month from 60.4 in September, according to the median estimate of economists surveyed by Bloomberg News. A level of 50 is the dividing line between expansion and contraction.
Fed Vice Chairman Janet Yellen said Oct. 21 that a new round of large-scale asset purchases, or quantitative easing, "might become appropriate if evolving economic conditions called for significantly greater monetary accommodation." The Fed's next policy meeting is on Nov. 2.
"Data in the U.S. is pretty benign," said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. "There's no possibility the Fed is anywhere near raising rates. If anything, the rhetoric over the last week or two has been increasingly towards preparedness to do more quantitative easing, should that be required."
Worst Performer
The dollar has declined 1.5 percent in the past week, the worst performer among the 10 developed-nation peers tracked by Bloomberg Correlation-Weighted Currency Indexes.
The euro weakened against its Japanese counterpart before a report that may show inflation in the 17-nation euro area moderated this month, boosting prospects the ECB will ease policy at this week's meeting.
"The economy is softening and that's still a threat to the region," said Gibbs. "The data is getting softer. If they do ease rates, that will definitely push the euro back down."
Europe's inflation rate probably eased to 2.9 percent in October after climbing to 3 percent last month, according to the median forecast of economists surveyed by Bloomberg News before the European Union's statistics office releases its initial estimate today.
Central bank policy makers are scheduled to announce a decision on interest rates on Nov. 3. The meeting will be chaired by the ECB's next president, Mario Draghi, who will succeedJean-Claude Trichet tomorrow. Six out of the 54 economists in a separate survey predict the bank will cut its benchmark rate from the current 1.5 percent.
To contact the reporters on this story: Candice Zachariahs in Sydney atczachariahs2@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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