Yen Falls Versus Euro, Dollar on Record Drop in Japan’s Exports

Dec. 22 (Bloomberg) -- The yen weakened against the euro and the dollar as a record plunge in Japanese exports last month signaled the world’s second-largest economy was falling deeper into a recession.

The ruble fell to the lowest level against the dollar in almost three years as Russia devalued the currency and tumbling oil prices this year battered its economy. The dollar weakened against the euro before data this week forecast to show U.S. consumer spending and durable goods orders declined.

“When Japan’s trade performance deteriorates, the yen tends to weaken,” said Shaun Osborne, chief currency strategist in Toronto at TD Securities Inc., a unit of Canada’s second- largest bank. “Japan’s growth outlook is concerning.”

The yen dropped 1.1 percent to 125.60 per euro at 9:36 a.m. in New York, from 124.22 on Dec. 19, paring its gain this year to 30 percent. The yen depreciated 0.5 percent to 89.74 per dollar from 89.31 and reached 90.23, the weakest level since Dec. 16. The yen may decline to 102 per dollar by the end of 2009, according to Osborne. The dollar weakened 0.6 percent to $1.3994 per euro from $1.3912. It slid to $1.4719 on Dec. 18, the weakest level since Sept. 25.

Bank of Japan Governor Masaaki Shirakawa said today the nation’s exports may decline further because of the yen’s strength this year and the global slowdown. Toyota Motor Corp., the world’s second-largest automaker, said it expects its first operating loss in 71 years because of plunging North American and European car sales and a surging yen.

“ I am surprised the Japanese hasn’t intervened thus far,” said Dennis Gartman, economist and editor of the Gartman Letter in Suffolk, Virginia, in an interview on Bloomberg Radio. “Intervention to weaken your currency can be very effective. There’s a great probability that the yen versus the dollar will trade at 100 to 105 over the course of the next year.”

The most volatile foreign-exchange markets since at least 1992 means currency traders will see the smallest pay cuts as the worst financial crisis since the Great Depression wipes out bonuses on Wall Street.