The currency was close to the weakest level in three months versus the euro as Japan's 0.5 percent overnight lending rate may encourage domestic investors to keep shifting money offshore in search of higher yields. The British pound slid to a record against the euro after a private report showed U.K. consumer confidence was the worst in almost four years.
Japan's currency traded at 102.53 a dollar as of 12:37 p.m. in Tokyo, from 102.66 in New York. It was also at 160.99 per euro from 161.28 yesterday, when it fell to 161.73, the lowest since Jan. 11. The dollar traded at $1.5703 a euro from $1.5712. The yen may decline to 103.20 a dollar and 161.70 per euro today, Tanaka forecast.
The pound dropped to 79.945 pence per euro, the lowest level since the 15-nation European currency's inception in 1999, before trading at 79.855 pence from 79.770 yesterday. It also weakened to $1.9660 against the dollar, from $1.9697 before a Bank of England meeting tomorrow, when policy makers will cut the main rate a quarter-percentage point to 5 percent, according to 50 of 61 economists in a Bloomberg News survey.
The yen may extend losses as lower price swings encourage so-called carry trades. One-month implied volatility for the dollar-yen fell to 13.50 percent, from 13.65 percent yesterday and 15.10 percent a week ago. Traders quote the gauge of expectations for future currency swings as part of pricing options.
Japan's benchmark interest rate compares with Australia's 7.25 percent and New Zealand's 8.25 percent. In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher rates, earning the spread.