Yen Advances on Speculation Japan Will Refrain From Currency Intervention

(Bloomberg)--The yen rose against most of its major counterparts on speculation Japan will refrain from intervening ahead of this week’s meeting of finance ministers and central bank chiefs from the Group of 20 nations. The Japanese currency traded near the strongest level in more than 15 years versus the greenback before a report tomorrow forecast to show U.S. housing starts fell, supporting the case for additional monetary easing. The euro dropped for a second day against the dollar on concerns the single currency’s recent advance to the highest in more than eight months was overdone.

“The so-called currency war issue is likely to be discussed at the G20 meeting, which will make it harder for Japanese authorities to carry out any intervention,” said Toshiya Yamauchi, a senior currency analyst at Ueda Harlow Ltd. in Tokyo. “The yen may test the all-time high of 79.75 versus the dollar if there’s no threat of intervention.” The yen traded at 81.33 per dollar as of 9:10 a.m. in Tokyo from 81.45 in New York on Oct. 15 when it touched 80.88, the strongest level since April 1995 and near its post-World War II high of 79.75 yen reached the same month.

The euro was at $1.3941 from $1.3977 on Oct. 15 when it reached $1.4159, the most since Jan. 26. The euro changed hands at 113.44 yen from 113.88 last week.

European Central Bank Chief Economist Juergen Stark said it would be “fatal” if the world’s currency areas were to engage in a “devaluation race,” Handelsblatt reported last week, citing an interview. Competitive devaluations can lead to protectionism, one of the main causes of the world economic crisis during the 1930s, Stark told the newspaper.

To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net