Dow Jones News

   By Matthew Walter 
   Of DOW JONES NEWSWIRES 
 

NEW YORK -(Dow Jones)- The yen fell to Y80 against the dollar for the first time since August, hammered by the Bank of Japan's stepped-up efforts to revive the Japanese economy.

Japan's currency has tumbled every day since Feb. 14, when the country's central bank said in a surprise announcement it would add Y10 trillion to its asset-buying program.

The aim is to stimulate Japan's economy, which contracted by 2.3% in the fourth quarter, and last year posted its first annual trade deficit since 1980.

The Bank of Japan's efforts put downward pressure on the yen by increasing the money supply. Japan also intervened directly three times last year to weaken the yen, which hit a post-World War II record high of Y75.31 in October.

The yen was down 0.79% at Y80.38 to the dollar Wednesday afternoon in New York. The currency is off over 5% in February, and its intraday low of Y80.40 was its weakest point since July 11.

With the Bank of Japan shaking its conservative reputation, some in the market believe a yen rally that stretches back to 1998 is coming to an end.

UBS lowered its forecast for the yen to Y85 against the dollar by the end of the year, compared with its previous estimate of Y80. The bank expects the Japanese currency to continue to slide in 2013, to Y90.

"With the yen, we have a whole host of themes coming together at the same time" that are pulling the currency down, said Camilla Sutton, chief currency strategist for Scotia Capital in Toronto. Sutton sees the yen ending the year at Y82 to the dollar.

However, others see a more limited downside for the currency. Many investors bought the yen as a safe harbor last year when Europe's debt crisis threatened to undermine the global economy. They could return if efforts to avoid a Greek default falter.

Japan is also likely to return to a trade surplus in 2012, as the effects of last year's earthquake fade, said Bilal Hafeez, global head of foreign-exchange research at Deutsche Bank.

"A lot of investors want to see the yen weakened on a sustained basis, but I don't think that's going to happen yet," Hafeez said, adding that the yen will strengthen "unless Japan is going to continually step up and do more [easing]."

-By Matthew Walter, Dow Jones Newswires; 212-416-2910; matt.walter@dowjones.com

--Martin Vaughan and Jessica Mead contributed to this article

(END) Dow Jones Newswires

February 22, 2012 13:31 ET (18:31 GMT)