The yen fell to the lowest in almost 27 months against the dollar on speculation the Bank of Japan will prolong a deflation-fighting policy that's keeping interest rates near zero. Prime Minister Junichiro Koizumi is among politicians urging the BOJ to keep pumping cash into the economy as the yen heads for the first annual decline in four years. ``There's political pressure on the Bank of Japan, and they're stressing that caution is needed,'' said Derek Halpenny, a currency strategist in London at the Bank of Tokyo-Mitsubishi Ltd. ``In this environment that means the yen can fall further.'' Against the dollar, the yen fell to 119.27 at 11:20 a.m. in London, the lowest since August 2003, from 118.80 yesterday in New York. The yen fell to 139.08 per euro from 138.85. The euro fell as low as $1.1656, the lowest in two years, from $1.1686, after the ZEW Center for European Economic Research showed German investor confidence unexpectedly declined this month. A separate report showed economic growth in the euro region accelerated in the third quarter. ``The ZEW was a disappointment and it shows there's still problems in Europe,'' said Naeem Wahid, a currency strategist at HBOS Plc in London. ``The market got ahead of itself in terms of how healthy Europe is, and we're now seeing the euro drop on that.'' Political Pressure The Bank of Japan has kept its so-called ``quantitative- easing'' policy of pumping cash into the economy and holding interest rates near zero since 2001 to help overcome deflation. Koizumi said yesterday a policy change is premature. The BOJ is independent in deciding monetary policy, yet it needs to coordinate with the government to help end deflation, Economic and Fiscal Policy Minister Kaoru Yosano said at a press conference in Tokyo today. Shinzo Abe, Japan's chief cabinet secretary, repeated the comments.