Yen Trades Near Lowest in 2009 as BOJ Weighs Lending to Banks

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The yen traded near the lowest level versus the euro this year as the Bank of Japan said it may provide 1 trillion yen ($10 billion) of subordinated loans to banks, raising concern it will flood the market with currency.

The euro advanced versus the yen and pound after a report showed German investor confidence unexpectedly rose in March for a fifth month. The yen fell more than 1 percent versus the Swedish krona and South Korean won on the Japanese central bank’s proposal to replenish capital.

“Ultimately, the BOJ will become more aggressive going forward,” said Lee Hardman, a London-based currency strategist at Bank of Tokyo-Mitsubishi Ltd. “That’s undermining the yen.”

The yen slid 0.7 percent to 128.24 per euro at 9 a.m. in New York, from 127.32 yesterday, when it reached 128.73, the weakest level since Dec. 29. The euro traded at $1.2966, compared with $1.2968. Japan’s currency declined 0.7 percent to 98.88 per dollar from 98.18.

Japan’s currency dropped 2.9 percent to 14.24 South Korean won and 1.3 percent to 11.66 versus the Swedish krona after Bank of Japan Governor Masaaki Shirakawa told reporters today in Tokyo that details of the subordinated loans will be provided “as soon as possible.” The BOJ will conclude a two-day policy meeting tomorrow.

The government offered in December to buy as much as 12 trillion yen ($122 billion) of preferred shares.

From Bloomberg News.