The yen snapped two weeks of gains against the dollar and euro on expectations a report tomorrow will show Japan's economy slowed in the first quarter.
"Most people are still looking for the yen to continue to weaken," said Marc Chandler, chief currency strategist at HSBC Bank USA. Besides Monday's report, concern is emerging about the lack of detail from Prime Minister Junichiro Koizumi on plans to write off bad bank loans and revive growth, Chandler said.
Japan's currency fell to ?120.96 per dollar, from ?120.15 on Friday in New York. It slipped to ?102.89 per euro, from ?102.20.
This week, the yen shed 1.5 percent against the dollar and 1.8 percent versus the euro, after rallying the previous two weeks against both.
Dips in the dollar's price below ?120 should be used as buying opportunities, said Chandler, who expects the yen to weaken past ?122 per dollar next week.
The British pound sagged a sixth day versus the euro and touched a 15-year low against the dollar, on speculation UK.
Prime Minister Tony Blair will push to adopt the single European currency after his Labour Party won yesterday's election.
The pound would have to join the euro at a weaker level than where it currently stands, some analysts say.
Japan's economy probably grew 0.1 percent in the year's first three months, according to a Bloomberg News survey, down from 0.8 percent growth in the previous quarter.
While expectations for a weak report have sparked yen-selling, the decline may be slowed by outstanding orders to buy the currency at the ?121 level, likely from Japanese exporters, said Scott Schultz, a yen trader at Brown Brothers Harriman & Co.
Schultz and other traders don't expect those barriers to hold for long. After rallying through April and May, reaching as strong as ?118.28 Friday, a three-month high, the yen is likely set to weaken again, they said.
Signs of renewed weakness in the economy are coming amid growing expectations that Prime Minister Koizumi will put off pushing through measures to write off bank loans and other steps to promote growth until after national elections in July, the analysts say.
Some economists cut Japanese growth estimates after a report yesterday that companies' spending on factories and equipment in the first quarter slowed from the previous three-month period.
Before yesterday's figures, expectations were for 0.4 percent growth in the first quarter.
"The [economic] fundamentals in Japan are once again really souring in a disturbing way, and ultimately the yen will reflect them and head toward ?130" per dollar in coming months, said Russell Jones, head of global foreign-exchange research at Lehman Brothers International in London.
Comments by Japanese policy makers also hurt the yen by reinforcing the gloomy outlook for the world's second-biggest economy.
Finance Minister Masajuro Shiokawa said yesterday "the economy is in a severe state," although it is "fundamentally firm." Heizo Takenaka, Japan's minister for economic and fiscal policy, said ``the economy has come to a severe point.''
Japan's government will lower its assessment of the economy for a fifth straight month in June, acknowledging it has entered into recession, the Yomiuri newspaper reported, citing a report to be released next week.
``I'd argue Japan is already in a recession,'' though there's a chance the economy expanded in the first three months, said Derek Halpenny, a currency economist at the Bank of Tokyo-Mitsubishi Ltd in London.
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