H James OT (Japanese stocks) Tuesday April 27, 12:18 am Eastern Time
FOCUS-G7 OK for $/yen rate puts spotlight on
Nikkei
By Risa Maeda
TOKYO, April 27 (Reuters) - The dollar is likely to settle into a narrow range
against the yen over the near term, after the Group of Seven (G7) industrial nations
indicated they were not concerned about present exchange rates, traders say.
But some senior currency traders said the dollar may gain momentum if Japanese investors shift their sights to
dollar-denominated assets, which could happen if corporate earnings results for the year to March, to be announced in
May, are as poor as expected, and spur a flight from the Tokyo stock market.
A drop in Tokyo stocks could also halt yen purchases by foreign investors and halt the yen's rising trend.
Foreign investors began buying Japanese stocks late last year on expectations of restructuring by Japanese banks and
companies. Their purchases also fuelled enthusiasm among Japanese investors for domestic stocks.
''Currently, Japanese investors seem to be more interested in high-performing domestic stocks than overseas assets,''
said Nao Nakajima, vice president and foreign exchange manager at the Bank of America in Tokyo.
''But if the stock market deteriorates after the Japanese corporate results, that would pave the way for their overseas
investment,'' Nakajima said.
The dollar currently faces selling pressure versus the yen from Japanese exporters converting their overseas earnings
into yen to cover operating costs in Japan. These firms sales overseas have helped create Japan's huge trade surplus
with the United States.
In the short term, any rises of the dollar may be capped by such exporter-led selling, while bargain-hunting by
Japanese institutional investors is likely to provide a floor at about 117 yen, traders said.
''There is a need for dollar selling by exporters ahead of the Golden Week holiday, as usual, keeping the dollar from
rising further above 119.50 yen,'' said Ryuichi Takami, forex manager at Sanwa Bank's treasury and trading
department.
After their daylong meeting in Washington on Monday, the G7 countries -- the United States, Japan, Germany, Britain,
France, Italy and Canada -- said in a statement they would ''maintain strong cooperation to promote stability of the
international monetary system and exchange rates among major currencies that are in line with fundamentals.''
As was widely expected, the statement made no specific reference to the exchange rates of the dollar, yen or euro.
''No reference to the currency levels means they do not mind the dollar moving around the current 120 yen,'' said
Hikaru Sekioka, vice president of market research at Sakura Bank's foreign exchange and international treasury
division.
In the weeks after Japan's Golden Week holidays beginning on Thursday the dollar may move in a range of between
117 and 123 yen, Sekioka said.
After the Washington meeting, Japanese Finance Minister Kiichi Miyazawa confirmed that the G7 nations are
unconcerned about the present levels of the three currencies.
''There is no real sense of concern at present'' among the G7 about the three major currencies," Miyazawa said.
The dollar was at 119.43/53 yen by early afternoon in Tokyo, compared with 119.05/15 yen in late New York on
Monday before the G7 meeting ended.
Monday's remark by Miyazawa that there was no need for extra fiscal stimulus steps for the current fiscal year, which
started on April 1, is also expected to lessen near-term fluctuations of the dollar versus the yen, traders said. ''The G7
meeting is over, but we cannot find any clues of a (currency market) direction,'' said Taro Ogai, manager of the
Industrial Bank of Japan's international treasury department.
''Miyazawa's ruling out of an extra budget means Japan will not bring any such ideas to the United States when (Prime
Minister Keizo) Obuchi meets President Clinton on May 3,'' Ogai said.
Dollar bears, who had speculated that Miyazawa would unveil an extra spending plan for 1999/2000 at the G7
meeting, bought back dollars after his denial, causing the dollar to briefly rise to 119.56 yen in New York.
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