Dollar Nears 6-Month Low vs Yen on Expectations
Japan Economy Recovering
By Keiko Kambara
Dollar Nears 6-Mo. Low on Expectations Japan Economy Recovering
Tokyo, Aug. 11 (Bloomberg) -- The dollar was little changed
against the yen and may fall later toward a six-month low on
expectations the Japanese economy is recovering while the U.S.
may slow, boosting returns on yen-denominated assets.
Optimism that Japan is climbing out of its worst recession
in half a century grew yesterday when the government said
machinery orders rose in June at the fastest monthly pace since
September.
''Expectations for a Japanese economic recovery are getting
stronger,'' said Ryuichi Takami, a foreign exchange manager at
Sanwa Bank Ltd. ''The dollar is likely to remain weaker because
of a move among global investors to shift their funds into yen
and the euro.''
The dollar was quoted at 114.80 yen, down from 114.82 yen in
late New York trading yesterday. That's near 113.60 yen the
dollar touched Thursday as its lowest since Feb. 11. The euro was
little changed at $1.0698, compared with $1.0710 in New York.
The U.S. currency has fallen more than 6 percent in the past
one month, when U.S. bonds and stocks declined on concern
inflation may be brewing in that country, which would prompt the
Federal Reserve to raise the federal funds rate on overnight
loans between banks from 5 percent as soon as this month.
Rising prices erode the value of bonds while higher rates
needed to contain inflation hurts stocks. That saps demand for
dollars with which to buy those securities.
The Dow Jones Industrial Average has fallen 4.81 percent in
the past month while the yield on the 30-year Treasury bond
yesterday touched 6.26 percent, its highest since Oct. 28, 1997.
Slowing Slide
Sanwa Bank's Takami said the dollar is likely to trade
between 114.30 yen and 115 yen during Tokyo trading hours today.
Expectations Japan will sell yen could help slow down the
dollar's decline, traders said. A stronger yen could derail
Japan's nascent economic recovery by making exports less
competitive abroad. The last time Japan said it intervened was on
July 21, when the dollar was at the 118-yen level.
The U.S. currency could be also buoyed as a haven
particularly against the yen if military tension in Asia further
intensifies.
China's air force has stepped up flights over the Taiwan
Straits after Taiwanese President Lee Teng-hui said on July 9
that the country's relations with China were ''state-to-state,''
angering the Beijing government. North Korea, meanwhile, has
threatened a missile test.
In other trading, the British pound was quoted at $1.6145,
little changed from $1.6150 in late New York trading yesterday.
The dollar rose to 1.4983 Swiss francs from 1.4966 francs in New
York.
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