Yen Weakens on Speculation Japan Will Curb Gains; Yuan Drops (bloomberg.com)

Aug. 12 (Bloomberg) -- The yen fell, retreating from a five-week high against the euro, on speculation Japanese officials will act to halt an advance in the currency that is imperilling the nation’s export-led economic recovery.

Japan’s currency weakened against all 16 major counterparts after officials from the Ministry of Finance and Bank of Japan met to discuss financial markets. Finance Minister Yoshihiko Noda will speak at a press conference at 5:30 p.m. in Tokyo, the ministry said. China’s yuan fell the most in seven weeks on speculation policy makers will counter its appreciation. South Korea’s won dropped for a third day after its central bank refrained from raising interest rates.

“There certainly has been more verbal intervention lately and that helped the yen,” said Lauren Rosborough, a senior currency strategist at Westpac Banking Corp. in London. “Intervention is not likely but any uncertainty will be used by the market to unwind some of that short dollar, long yen trade that has been building.”

The yen declined to 110.75 per euro as of 8:36 a.m. in London, from 109.74 in New York yesterday, after rising to 109.24, the strongest level since July 6. Japan’s currency was at 85.75 per dollar, from 85.32 yesterday, when it appreciated to 84.73, the most since July 1995. The dollar fell to $1.2917 per euro, from $1.2863.

Japan’s top currency official Rintaro Tamaki exchanged views on domestic and global financial markets with Bank of Japan executive director Hiroshi Nakaso today. Monetary policy wasn’t discussed at the meeting, Tamaki told reporters in Tokyo.

Japan’s Prime Minister Naoto Kan told Chief Cabinet Secretary Yoshito Sengoku that the sudden gains in the yen were unusually rapid, Jiji Press reported.

Last Intervention

Japan hasn’t intervened in the currency markets since March 16, 2004, when the yen was around 109 per dollar. The Bank of Japan sold 14.8 trillion yen ($173 billion) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003.

The country’s large manufacturers expect the yen to average 90.16 per dollar in the six months to March 2011, according to the Bank of Japan’s quarterly Tankan survey released July 1. Japanese exports make up about 13 percent of the economy.

Exporters said they can remain profitable as long as the yen trades at 92.90 per dollar or weaker, according to a Cabinet survey released in February. The breakeven point was 97.33 a year earlier...

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