By Ben Levisohn and Anna Rascouet Dec. 18 (Bloomberg) -- The yen fell against the euro and the dollar after the Bank of Japan said it won’t tolerate consumer price declines, spurring speculation the central bank will maintain the target lending rate at almost zero. The Swiss franc advanced as the Swiss National Bank refrained from selling the currency to weaken it, pushing the currency beyond 1.50 per euro for the first time since a rally in March led to an intervention. The franc also strengthened today on reduced demand for higher-yielding assets as a border guard said Iranian forces occupied an Iraqi oil well yesterday. The border guard’s comments couldn’t be immediately verified. “The Japanese have to do something,” said Jonathan Gencher, director of foreign-exchange sales at Bank of Montreal in Toronto. “They are going to decide that they have to do something with zero-rate policy.” The yen declined 0.4 percent to 129.51 per euro at 9:05 a.m. in New York, from 129 yesterday. Japan’s currency slid 0.5 percent to 90.42 per dollar, from 89.96. The euro depreciated 0.1 percent to $1.4322, compared with $1.4338. Iranian forces entered Iraqi territory at dawn yesterday and occupied well number 4 in the East Maysan field in the al- Fakah region, 450 kilometers (280 miles) south of Baghdad, Border Guard General Zafer Nazmi said. “They positioned tanks around it and dug trenches,” Nazmi said by phone from Basra. “They are still there, they raised the flag.” East Maysan in southern Iraq is an old oil field that’s no longer in production, according to Nazmi. Iraq is the third- largest oil producer in the Mideast after Saudi Arabia and Iran. ‘Risk Element’ “There’s a little risk element coming into the market,” Gencher said. The euro dropped 0.4 percent to 1.4959 Swiss francs, from 1.5020, as Swiss policy makers avoided intervening. The dollar fell 0.4 percent to 1.0436 franc. Swiss policy makers changed their language on currency purchases at last week’s quarterly monetary-policy assessment, saying the bank will act to counter “any excessive” moves by the franc against the euro. At its previous assessment in September, the bank said it would “continue to act decisively to prevent any appreciation.” The SNB’s failure to act yesterday “gave the idea to the market that maybe the SNB doesn’t care anymore,” said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-biggest lender. “It would be a risky game to bet on more franc strength. If they stopped intervening, that would bring the euro-franc to levels they cannot accept.” March Intervention The franc tumbled on March 12 when the Swiss National Bank intervened to prevent the strengthening currency from undermining the economic recovery. Central banks intervene by buying or selling currencies to influence exchange rates. Switzerland’s economy returned to growth in the third quarter after a yearlong contraction, led by a surge in company spending and a revival in exports. Japan’s bonds rose as the BOJ’s statement today on prices signaled the central bank is unlikely to raise rates until inflation returns to the world’s second-largest economy. BOJ Governor Masaaki Shirakawa and his colleagues refrained from announcing more policy actions, choosing instead to watch the effect of a 10 trillion yen ($111 billion) lending program adopted two weeks ago after the government urged them to do more to fight deflation. The bank kept the target lending rate at 0.1 percent, as forecast by all 19 economists in a Bloomberg survey. The euro earlier rose against the dollar as the Munich- based Ifo institute said German business confidence rose to 94.7 this month, the highest since July 2008. To contact the reporters on this story: Anna Rascouet in London at arascouet@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

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