Ganesh <A rapid pullout from dollar assets by foreign investors could cause U.S. stock and bond markets to plunge.> Its a good thing that 'we are the USA' -- cause these guys had me worried for a moment. Maybe we need to get the word out -- seems to be real problems recognizing who we are -- and of course naturally I mean recognition by others.
Wednesday August 4, 3:37 am Eastern Time
FOCUS-Dollar keeps footing vs yen on Japan
jawboning
By Tamawa Kadoya
TOKYO, Aug 4 (Reuters) - Further Japanese jawboning helped the dollar keep its footing
against the yen on Wednesday, but markets grew increasingly sceptical that Tokyo will get
any help curbing the strong yen.
Finance Minister Kiichi Miyazawa said that a telephone conversation on Tuesday with his U.S. counterpart, Treasury
Secretary Lawrence Summers, in which they discussed their respective economies, was arranged when the dollar appeared
set to fall below 115 yen.
Japan has been bemoaning the yen's rise, which threatens to scuttle a fledgling economic recovery, and some economists say
Washington may have begun worrying over the dollar's weakness.
Miyazawa said that in an atmosphere in which the yen was expected to rise further, beyond 115 yen to the dollar, the
Treasury's Timothy Geithner and the Finance Ministry's Haruhiko Kuroda thought it best for him and Summers to exchange
opinions.
By mentioning a specific level, Miyazawa's comments highlighted views that 115 yen was a critical point which Japan, and
possibly the United States, was willing to defend.
''It's difficult to sell into 115 yen, now that Miyazawa's mentioned that level specifically,'' a dealer at a trust bank said.
The dollar has fallen by more than five percent against the yen over the past month. Economists worry that non-U.S.
investors will lose their willingness to continue financing the record large and expanding U.S. trade deficit at prevailing asset
prices.
A rapid pullout from dollar assets by foreign investors could cause U.S. stock and bond markets to plunge.
The dollar was quoted at 115.23/28 yen as of 0603 GMT, compared with 115.07/10 in midday trade. It stood at
115.22/32 yen in late New York on Tuesday.
The Finance Ministry and Treasury said on Tuesday that Miyazawa and Summers had discussed recent foreign exchange
movements. But both sides have refused to divulge further details of the conversation.
The dollar's gains were limited on Wednesday on disappointment after Washington pointedly omitted any reference to the
dollar or concerted intervention.
Tokyo stock prices were also damaged by waning hopes for immediate joint action to stem the dollar's decline, which cast a
shadow over blue-chip exporters, who are hurt by a stronger yen.
The benchmark Nikkei average lost nearly two percent before closing Wednesday's session down 1.58 percent, or 284.55
points, at 17.685.38.
Many dealers remained sceptical of the possibility of concerted action by the two nations to stem the dollar's falls, unless
U.S. asset markets looked dangerously vulnerable.
''U.S. authorities likely view dollar-buying intervention as a last resort...it will be very difficult for them because they will not
be allowed to fail,'' a senior dealer at a major U.S. bank said.
Trends favouring the yen, such as inflation fears hurting U.S. asset markets, continued capital outflows from dollar-based
assets, and Japanese exporters and investors' hedge-related sales will keep pressure on the greenback, dealers said. |
