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By Bloomberg

The yen dropped for a second day before weekend elections forecast to renew Japanese Prime Minister Shinzo Abe’s mandate for economic policies that have weighed on the currency.

The yen fell against 12 of its 16 major counterparts as a recovery in global stock markets reduced demand for haven assets. Norway’s krone slid for a third day as tumbling crude oil prices prompted the central bank to unexpectedly cut interest rates yesterday. The New Zealand dollar dropped for the first time in four days as an industry report showed manufacturing growth slowed last month. The U.S. currency rose against most of its major peers amid speculation the Federal Reserve is moving closer to raising borrowing costs.

“The ruling coalition looks like it will preserve its two- thirds majority, an election result that will support Abenomics,” said Kazuo Shirai, a trader at MUFG Union Bank NA in Los Angeles, referring to Abe’s economic plan. “I wouldn’t be surprised to see the yen weaken to about 122 per dollar.”

The yen fell 0.3 percent to 118.96 per dollar at 11:06 a.m. in Tokyo after declining 0.7 percent yesterday. The currency has still strengthened 2.1 percent since Dec. 5, the first weekly gain since October. Japan’s currency declined 0.2 percent to 147.53 per euro. The dollar rose 0.1 percent to $1.2401 per euro.

Weekend Election

The yen has tumbled more than 30 percent in the past two years as Abe implemented his economic policy of monetary easing, fiscal spending and structural reform.

Abe’s Liberal Democratic Party may win more than 300 of 475 lower house seats in the Dec. 14 election, Kyodo News reported this week. The LDP’s coalition partner Komeito may take more than the 31 seats it currently holds, the agency said, citing a telephone survey.

“He’ll come back in, which means continuation of Abenomics and very loose policy,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. “There’s no reason to buy the yen on a medium-term horizon.”

The yen has slumped 6.4 percent in the past six months, the worst performer after the krone of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar advanced 12 percent and the euro rose 1 percent.

The krone fell to the weakest in more than 11 years versus the dollar after the central bank cut its deposit rate to 1.25 percent from 1.5 percent yesterday and as the price of oil slid below $60 a barrel for the first time since July 2009.

‘New Lows’

“The Norwegian krone slumped to new lows after the Norges Bank unexpectedly cut interest rates to head off a weakening in growth prospects due to falling oil prices,” ANZ Bank New Zealand Ltd. analysts including senior currency strategist Sam Tuck in Auckland, wrote today in a note to clients.

The krone declined 0.6 percent to 7.3332 per dollar after slipping to 7.3455, the weakest since September 2003. The currency slipped 0.5 percent to 9.0913 per euro.

The kiwi fell as Bank of New Zealand and Business New Zealand said their index of the nation’s manufacturing declined to 55.2 in November from a revised 58.9 in October. Numbers above 50 indicate growth.

The currency also weakened as Fonterra, the world’s biggest dairy exporter, said milk volumes may be impacted by lower prices being paid to farmers.

New Zealand’s dollar fell 0.4 percent to 77.90 U.S. cents after dropping to 76.09 cents on Dec. 9, the lowest level since June 2012.

Dollar Index

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was little changed at 1,118.51. The gauge jumped 0.6 percent yesterday after U.S. retail sales climbed the most in eight months.

Fed officials meet Dec. 16-17, and have in recent days discussed the future of their vow to hold interest rates low for a “considerable time.”

Australia’s dollar declined toward a four-year low after Reserve Bank Governor Glenn Stevens indicated the currency will probably weaken next year.

“It’s quite likely that it will a year from now be lower than it is today, on the basis of the facts that we presently have,” Stevens said on the exchange rate in an interview with the Australian Financial Review published today. “If I had to pick a figure now, I would say probably 75 is better than 85.”

The Aussie fell 0.3 percent to 82.46 U.S. cents after sliding to 82.15 yesterday, the lowest since June 2010.