Yen Falls Versus Dollar as Japan’s Current-Account Gap Balloons

March 9 (Bloomberg) -- The yen declined against the dollar and euro as Japan posted its first trade deficit in 13 years, reducing the currency’s appeal as a refuge.
Britain’s pound slipped below $1.38 for the first time since January after the government took a majority stake in Lloyds Banking Group Plc, the biggest U.K. mortgage lender. The dollar rose against 15 of the 16 most actively traded currencies as investors sought safety in the world’s reserve currency.
“The worst trade data on record and first current account deficit posted in 13 years derailed the yen,” said Jack Spitz, managing director of foreign exchange at National Bank in Toronto. “There’s Japanese yen weakness and British pound weakness. You can take your pick on which will do worse.”
The yen weakened 0.8 percent to 99.02 per dollar at 10:08 a.m. in New York, from 98.25 on March 6. Japan’s currency depreciated 0.6 percent to 125.04 per euro from 124.34. The euro fell 0.3 percent to $1.2617 from $1.2653.
Japan, the world’s second-biggest economy, recorded a current-account deficit of 172.8 billion yen ($1.76 billion) in January, the Finance Ministry said in Tokyo. The deficit was the widest since January 1985, the earliest year for which there are comparable data.
Futures traders decreased bets that the yen will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so- called net longs -- was 20,070 on March 3, compared with net longs of 28,635 a week earlier.
Dollar Index
The Dollar Index, which the ICE uses to track the greenback’s performance against the currencies of six major U.S. trading partners, rose 0.8 percent to 89.218. The index touched 89.624 last week, the highest level since April 2006.
The MSCI World Index lost 0.9 percent today, while the Standard & Poor’s 500 Index increased 0.4 percent after declining the most last week since November.
The pound fell against all of the 16 major currencies after Lloyds Banking Group ceded control to the government in return for state guarantees covering 260 billion pounds ($367 billion) of risky assets. Sterling lost as much as 2.5 percent to $1.3743, the lowest level since Jan. 26, and dropped 1.7 percent to 91.28 pence against the euro.