Yen Falls as Tankan Fuels Easing Speculation

The yen slid for a second day against the euro after the Bank of Japan (8301)’s Tankan report showed sentiment failed to improve at the nation’s largest companies, stoking prospects the central bank will boost monetary stimulus.

Japan’s currency weakened versus all of its major peers before a report economists say will show manufacturing picked up in the U.S. in March, undermining demand for haven assets. The euro was within a cent of the strongest in a month against the greenback after European finance ministers increased their crisis bailout fund. Australia’s dollar advanced after a Chinese manufacturing gauge released yesterday unexpectedly rose, easing concern the world’s second-largest economy is slowing.

“The yen should be on the back foot because the Tankan survey was a bit worrying,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The impression given was the Bank of Japan might have to do more.”

The yen lost 0.1 percent to 82.98 per dollar. It slid 0.2 percent to 110.76 per euro, after declining 0.8 percent on March 30. Europe’s 17-nation currency was little changed at $1.3349 after reaching $1.3386 on March 27, the strongest since Feb. 29.

The Tankan index for Japan’s largest manufacturers was unchanged last quarter from minus 4 in December, the BOJ said today in Tokyo. That was less than the median estimate of minus 1 in a Bloomberg News survey of economists. A negative number means pessimists outnumber optimists.

Today’s report showed that executives expect the sentiment index to remain negative at minus 3 in June.

“The worse-than-expected Tankan survey seems to be fueling talk that the BOJ will ease policy further,” Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore, said. “This is probably leading to selling of the yen.”

Traders added to bets the yen will weaken against the dollar. The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen versus the U.S. currency compared with those on a gain — so-called net shorts — was 67,622 on March 27, compared with net shorts of 25,821 a week earlier, figures from the Commodity Futures Trading Commission show.