The yen fell for a sixth week against the US dollar, its longest losing streak in three years, as faster US economic growth boosted US Treasury yields and the Bank of Japan indicated plans for further stimulus.
The greenback rose against most of its major peers after the US Federal Reserve said labor-market conditions “have improved further,” diminishing forecasts for further stimulus. Norway’s krone dropped against its major counterparts after the central bank unexpectedly cut interest rates.
“The impetus from dollar-yen strength has come from the Treasuries market,” said Ray Attrill, a senior currency strategist at BNP Paribas SA in New York. “You had quite an explosive sell-off in Treasuries, but, at the same time, the economic news has remained good and risk sentiment has remained positive.”
The yen dropped 1.2 percent to ￥83.43 per US dollar in the five days ended on Friday in New York. The six-week losing streak matches one ended March 2009. The Japanese currency fell 1.6 percent against the euro to ￥109.95. The shared currency added 0.4 percent to US$1.3175.
Japan’s currency slid 5.6 percent during the past month in the worst performance among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The greenback appreciated 0.4 percent and the euro advanced 0.8 percent.
Futures traders increased their bets that the yen would decline against the US dollar. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain — so-called net shorts — was 42,380 on Tuesday, compared with net shorts of 19,358 a week earlier, figures from the Washington-based Commodity Futures Trading Commission show.
The yen reached its weakest level in almost 11 months versus the US dollar after Bank of Japan Governor Masaaki Shirakawa indicated on Tuesday that the central bank would keep using monetary policy as a tool to tackle deflation.
The Japanese currency rebounded in the final two days of the week as investors wagered the largest four-day decline since November last year had happened too quickly and core inflation and consumer confidence in the US were weaker than expected.
The extra yield investors receive for holding two-year Treasuries instead of Japanese debt widened to 24 basis points, or 0.24 percentage point, the most since July 28, increasing the attractiveness of US dollar assets. There is a “relatively high” correlation between the two-year spread and the US dollar-yen exchange rate, Shirakawa has said.
The yield on the 10-year Treasury note increased for eight straight days in the longest streak since 2006. It touched 2.36 percent yesterday, the highest level since Oct. 28.
“The focus of the currency market has shifted away from equities to fixed income as the primary metric of movement,” said Boris Schlossberg, director of research at online currency trader GFT Forex in New York.