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The yen slid to its lowest level in seven years versus the dollar after Japan's Prime Minister Shinzo Abe called early elections seeking to renew his mandate for economic stimulus as the nation entered a recession.
The 18-nation euro declined versus most of its 31 major peers as European Central Bank President Mario Draghi said officials "will do what we must" to raise inflation. The Swiss franc tested its cap versus the weakening shared currency as a central bank official vowed to defend it. The yen fell for a sixth week against the euro, the longest streak since December 2013, as the Bank of Japan warned inflation may slip below one per cent before a consumer prices report November 27.
The yen tumbled 1.3 per cent against the dollar this week in New York, touching 118.98 on November 20, the weakest level since August 2007. The currency lost 0.2 percent versus the euro, which fell 1.2 percent to $1.2391 per dollar.
Dollar Strength
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, rose a fifth week, adding 0.2 percent to close at the highest level since March 2009.
Hedge funds and other large speculators increased wagers on dollar strength versus eight of its major peers to a record. The difference in the number of positions that profit from on gains compared with those on declines -- net longs -- was 393,529 on Nov. 18, according to data from the Washington-based Commodity Futures Trading Commission.
Investors boosted their net-short positions in the yen against the dollar with net shorts to 92,454, the most since Oct. 14.
A gauge of volatility touched the highest since February. JPMorgan Chase & Co.'s Global Foreign-Exchange Volatility Index touched 8.92 percent, before closing the week at 8.49 percent.
Brazil's real rose the most versus the dollar this week on speculation that President Dilma Rousseff is close to nominating a team capable of reviving Latin America's largest economy. The currency gained 3.3 percent to 2.5158 per dollar.
Ruble Rises
Russia's ruble rallied as oil futures gained for the first time in nine weeks. The currency of the world's second largest oil exporter after Saudi Arabia rose 1 percent to 45.7140 per dollar.
The Swiss franc was little changed at 1.20158 per euro, after testing the currency's 1.20 cap. Weakness that saw the currency fall to 1.20329 yesterday, its lowest level since Nov. 12, was "certainly not a market-driven move," according to Ipek Ozkardeskaya, a currency strategist at Swissquote Bank SA in Gland.
Swiss National Bank Governing Board Member Fritz Zurbruegg said the central bank won't hesitate to enact supplementary measures to protect the 1.20 level.
The euro slipped as ECB President Draghi said policy makers will look to boost inflation expectations as quickly as possible.
ECB Policy
The ECB wants to increase the size of its balance sheet to early-2012 levels to help revive the region's economy. The central bank has already cut interest rates to record lows and is buying covered bonds and preparing to buy asset-backed securities to stimulate growth.
The central bank next meets on Dec. 4.
"The ECB is going to be delivering something more substantial at its meeting in December and his comments have been very much in line in confirming our view," said Michael Sneyd, a currency strategist at BNP Paribas SA in London.
The dollar rallied versus most of its 16 major peers as minutes from the Federal Reserve's most recent meeting showed policy makers weighing their commitment to holding rates at virtually zero for a "considerable time." The central bank adopted the suggestion from some participants to add wording emphasizing that the timing of interest-rate increases would depend on economic data.
The yen tumbled as Abe announced early elections on Nov. 18, a day after a report showed Japan's economy contracted for a second-consecutive quarter. Abe also postponed a planned sales- tax increase, and ordered his ministers to start preparing a stimulus package of changes to his policies, known as Abenomics.
Japan Economy
BOJ Governor Hariuhiko Kuroda said responsibility for Japan's fiscal health lies with the government. Consumer prices excluding fresh food slipped in October from a month earlier, according to the median estimate of 28 analysts surveyed before a report next week. Stripped of the effects of April's sales-tax increase, the central bank's core measure of inflation was 1 percent in September, a level Kuroda said in July wouldn't be breached.
The yen has fallen too quickly, according to Japanese Finance Minister Taro Aso. The currency's 14-day relative strength index against the dollar has been below the 30 level all month, indicating to some traders that the currency is poised to strengthen.
The yen has lost 4.1 percent this year among 10 developed- market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has declined 3.2 percent while the dollar is up 8.7 percent.
