Yen hits 16-month low on fresh stimulus talk

What's Down: The yen weakened to a 16-month low against the euro on speculation the government will take steps to boost growth.

The yen weakened to a 16-month low against the euro on speculation the government will take steps to boost growth. The Japanese currency dropped 0.6 per cent to ¥113.9 per euro in midday London trading yesterday after weakening to ¥113.97, the lowest since August 4 last year.

The yen was at ¥85.81 per dollar after falling to ¥85.87, the weakest since September 17, 2010. Japan's consumer prices, excluding fresh food, fell 0.1 per cent last month from a year earlier, according to the median estimate in a Bloomberg survey. That would be the sixth decline in seven months and compares with the Bank of Japan's target of 1 per cent inflation.

The yen has tumbled 14 per cent this year, the biggest drop among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes.

The US dollar is the second-worst performer with a 3 per cent slide, while the euro has lost 0.5 per cent. Norway's krone is the best performer, climbing 4.7 per cent, the indices show. The krone advanced 0.4 per cent to 5.5686 per dollar yesterday.

Further depreciation of the yen versus the dollar is one of the surest bets going into the new year, said John Taylor, the founder and chairman of the New York-based currency hedge fund FX Concepts.

The yen will weaken to ¥90 per dollar before a resumption in risk aversion prompts investors to return to traditional refuge currencies, he said.

* Bloomberg News