Japanese yen falls as govt pressurises cbank

The yen fell against higher- yielding currencies including Australia’s dollar after Japan’s government increased pressure on the central bank to expand monetary easing to fight deflation.

The euro weakened for the first time in four days versus the dollar on speculation European Union Monetary Affairs Commissioner Olli Rehn will today push Greece to deepen planned spending cuts to reduce its budget deficit. The greenback traded near the lowest in almost a week versus the Australian currency on expectations a report today will show US manufacturing expanded last month at a slower pace.

“Government officials appear to be calling on the Bank of Japan to do more on the monetary policy easing front,” said Takashi Kudo, general manager of market information service in Tokyo at NTT SmartTrade Inc, a unit of Nippon Telegraph & Telephone Corp “This may weigh on the yen.”

The yen declined to 79.95 per Australian dollar as of 6:55 am in London from 79.65 in New York on February 26. The euro fell to $1.3591 from $1.3631, and fetched ¥121.23 from ¥121.26. The US dollar advanced to ¥89.20 from ¥88.97.

Australia’s dollar was at 89.64 US cents from 89.54 cents, after earlier reaching 90.08 cents, the highest since February 23. New Zealand’s was at 69.72 US cents from 69.82 cents.

Japan’s currency slipped after Finance Minister Naoto Kan told lawmakers in Tokyo today that he wants the central bank to boost its efforts to fight deflation. Financial Services Minister Shizuka Kamei said in parliament he wants the BOJ to underwrite government debt.

The Japanese government has increased calls on the Bank of Japan to prop up growth since the administration declared the economy was in deflation on November 20. Consumer prices excluding fresh food fell 1.3 per cent in January from a year earlier, an 11th month of declines, the statistics bureau said on February 26.

The euro weakened versus 12 of 16 most-active currencies before EU Monetary Affairs Commissioner Rehn meets Greek Prime Minister George Papandreou later today.

German Chancellor Angela Merkel and Luxembourg Prime Minister Jean-Claude Juncker signaled yesterday that Rehn will warn Greece it must take more steps to narrow the EU’s largest budget gap.

“A rescue measure, now said to be under consideration, won’t resolve the root cause for debt problems in Greece immediately,” said Yuichiro Harada, senior vice president of the foreign-exchange division at Mizuho Corporate Bank Ltd, a unit of Japan’s second-largest lender. “Uncertainties about prospects about Greece will continue to weigh heavily on sentiment toward the region’s currency.

Frankfurt-based KfW Group is preparing measures that are part of a European plan to grant Greece as much as €25bn ($34bn) in aid should the need arise, four German lawmakers, who spoke on the condition of anonymity because the information is confidential, said last week.

The US dollar fell for a second day against Australia’s before reports this week that may add to evidence the economic recovery isn’t strong enough for the Federal Reserve to raise borrowing costs.

The Institute for Supply Management’s factory index fell to 58.0 last month from 58.4 in January, according to a Bloomberg News survey of economists before the data’s release today. Payrolls dropped by 50,000 in February after declining by 20,000 in January, according a separate survey before the Labor Department’s March 5 report.