Yen slides against dollar, euro after G-20

FRANKFURT (MarketWatch) � The yen came under renewed selling pressure Monday after officials from the Group of 20 industrial and developing nations decided against scolding Japan for policies that have dragged heavily on the local currency in recent weeks.

The dollar USDJPY hit a high of 94.20 yen during the session � a level the currency hasn�t seen since May 2010 � before edging back to �93.81. The dollar bought �93.52 in North America late on Monday.

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Failure by the G-20 to take a more aggressive stance on monetary easing could help intensify currency wars. A look at the potential consequences for inflation and the global economy. Photo: Getty Images

The euro EURJPY climbed as high as �125.68, and was more recently at �125.34, versus �124.96 on Friday.

�It was a close one for Japan, but now that the G-20 meeting is over, the great yen short can resume,� said Kathy Lien, managing director of FX strategy at BK Asset Management in New York.

�The next catalyst for yen weakness will be the nomination of [the new Bank of Japan] governor, who will undoubtedly reaffirm his plans to ease monetary policy aggressively,� she said.

G-20 finance ministers and central bankers on Saturday failed to single out Japan for the currency�s sharp decline in recent months. Instead, the G-20 simply said that the group will �refrain from competitive devaluation� and won�t be targeting �exchange rates for competitive purposes.� Read blog: What the G-20 likely implied with its silence on yen.

A weaker currency tends to give exporters in a nation an advantage over their competitors elsewhere.

�The official talk around the G-7 statement and the G-20 meeting generated a great deal of needless noise in the foreign-exchange room. It is almost like a librarian yelling �Quiet.� It may be more disruptive than the initial noise,� Marc Chandler, global head of currency strategy at Brown Brothers Harriman, wrote in a note to clients. See: First rule of currency war: Don�t say currency war.

�With the meetings out of the way, we expect the official jawboning about the currency market to die down,� Chandler said.

Reuters Enlarge Image Shinzo Abe, Japan�s prime minister

Some of the yen�s weakness on Monday came after Prime Minister Shinzo Abe was quoted by Reuters as saying that purchasing foreign bonds � a controversial move that could potentially lead to further yen losses � was among the options before the Bank of Japan.

Dow Jones Newswires separately cited Abe as saying that his administration would consider legislative changes to the Bank of Japan if the central bank failed to meet its stated policy target of achieving a 2% rise in inflation.

Abe has been pushing the Bank of Japan to adopt more aggressive measures to lift the country from an era of falling prices.

Still, some analysts expect the yen to strengthen in the coming few days after a sharp retreat in the recent past. Rallying against the yen, the euro has jumped nearly 21% and the dollar nearly 16% over the past three months.

/quotes/zigman/4868099/sampled USDJPY 93.1200, -0.4445, -0.4751% /quotes/zigman/4868097/sampled EURJPY 122.8750, -1.4502, -1.1664% Dollar-yen and euro-yen Three-month price moves

Meanwhile, the ICE dollar index DXY , a measure of the dollar�s performance against a basket of six major global currencies, climbed to 80.572, compared with 80.475 in North America on Friday.

The WSJ dollar index XX:BUXX , a rival measure of the greenback against a slightly wider currency basket, rose to 71.96 from 71.86.

Among other major currency pairs, the euro EURUSD was fetching $1.3359, little changed from $1.3361 ahead of testimony by European Central Bank President Mario Draghi before a European Parliament committee.

The British pound GBPUSD changed hands for $1.5476, compared with $1.5513.

The Australian dollar AUDUSD was unchanged at $1.0306.