Yen Weakens to 6-Month Low on Risk-Linked Selling

As indicators suggest manufacturing growth around the world, yen remains preferred risk-funding currency.

The yen fell to a six-month low versus the dollar after reports showed manufacturing in China, Europe, and the U.K. expanded last month, driving demand for risk and underscoring Japan’s currency’s role in the carry trade.

Japan’s currency weakened against most of its 16 major counterparts as Governor Haruhiko Kuroda said the Bank of Japan will keep monetary policy accommodative until inflation is stable at 2 percent. The pound reached the strongest level since January against the euro after a gauge of U.K. manufacturing increased in November at a faster pace than analysts forecast. New Zealand’s dollar rallied, while Canada’s currency traded at the weakest level since October 2011.

A similar gauge for the euro region also confirmed manufacturing expanded in November at the fastest pace in more than two years.

“There is further evidence that the global manufacturing cycle appears to be strengthening,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Kuroda has also been speaking again, reiterating that the BOJ will continue to ease monetary policy until inflation stabilizes at 2 percent. All these developments reinforce the yen weakening trend.”

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