Yen falls on China PMI; Nishimura comment on currency

by on January 24, 2013 7:50 am BST

The yen weakened, snapping a three- day advance, as signs of strengthening manufacturing in China damped demand for refuge assets and a Japanese official endorsed the currency’s drop to 100 per dollar.

The yen fell against all its major counterparts after Japan’s Deputy Economy Minister Yasutoshi Nishimura said its correction from strong levels “isn’t over yet.” It paced losses among Asian currencies after North Korea threatened to test nuclear weapons. The 17-nation euro rallied.

“Yen selling accelerated after the Chinese data,” said Yuji Saito, the director of the foreign-exchange department in Tokyo at Credit Agricole SA. (ACA) “The weakness in the yen has been reinforced as the market is selling Asian assets amid rising geopolitical risks in North Korea.”

The yen lost 0.8 percent to 89.35 per dollar as of 6:47 a.m. in London after gaining 1.7 percent in the previous three days. The Japanese currency reached 90.25 on Jan. 21, the weakest level since June 2010. It fell 1 percent to 119.15 per euro from yesterday. The euro climbed 0.2 percent to $1.3339.

HSBC Holdings Plc and Markit Economics said today the preliminary reading of China’s Purchasing Managers’ Index rose to 51.9 in January from the 51.5 final reading for December and the 51.7 median estimate of analysts surveyed by Bloomberg News.

Nuclear Threat

Japan’s Nishimura said a yen at 100 to the dollar wouldn’t be a problem, suggesting global criticism may fail to convince Prime Minister Shinzo Abe to temper his campaign to weaken the currency. Nishimura spoke in an interview in Tokyo today.

Japanese imports exceeded exports by 641.5 billion yen ($7.2 billion) last month, compared to a 954.8 billion yen gap in November, the Ministry of Finance said today. Exports dropped by more than forecast, and the annual trade deficit was a record 6.93 trillion yen, the data showed.

Japanese consumer prices excluding fresh food probably fell 0.2 percent in December from a year earlier, economists said before the figures due tomorrow. The Bank of Japan (8301) this week increased its inflation target to 2 percent and announced open- ended asset purchases to start next year.

“There is very little substance in terms of the BOJ’s agreement to policy action that backs up its commitment to the inflation target or provides an underpinning for a move weaker in the yen,” said Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney.

North Korea threatened to conduct a nuclear weapons test “targeted” at the U.S. after the Obama administration pushed through new United Nations sanctions against the state for its rocket launch last month.

South Korea’s won declined 0.3 percent to 1,068.85 per dollar. The Shanghai Composite Index of shares lost 0.5 percent and South Korea’s Kospi Index dropped 0.8 percent.