Yen to Weaken to 102 Against Dollar on Recession, Barclays Says

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The yen will fall to 102 against the U.S. dollar as risk sentiment improves and a weakening domestic economy prompts investors to buy assets outside Japan, Barclays Capital said.

The currency has lost 8.8 percent since strengthening to 87.12 per dollar on Jan. 21, the highest since 1995, as investors sold higher-yielding assets to repay low-cost borrowings in Japan. The yen will weaken 4 percent against the greenback over the next three months, Barclays Capital said, revising last month’s forecast for it to strengthen to 86.

“The deteriorating state of both the economy and the political situation appears likely to add momentum to negative sentiment about Japanese assets,” Toru Umemoto and Yuki Sakasai, Tokyo-based strategists with Barclays Capital, wrote yesterday in a research note. “The Japanese current account is declining, outward foreign direct investment increasing and Japanese investors continue to purchase foreign securities.”

The yen slipped 0.3 percent to 98.41 per U.S. dollar as of 9:36 a.m. in Tokyo from 98.07 in New York yesterday.

Japan’s currency in February posted its worst monthly drop in more than 13 years as reports showed the world’s second- largest economy shrank the most since the 1974 oil shock and the trade deficit widened to a record.

Net investment in overseas bonds and stocks surged to a record 1.5 trillion yen ($15.4 billion) in the week ended Feb. 21, as Prime Minister Taro Aso’s disapproval rating climbed to 75 percent, the highest since he took office in September, based on Asahi newspaper surveys.

From Bloomberg News.