Yen Falls Versus Dollar on Concern Japan May Sell Its Currency
By Kanako Chiba and Mari Murayama
Tokyo, July 17 (Bloomberg) -- The yen weakened against the dollar, snapping a seven-day rally, on speculation Japan will sell its currency for an eighth time since May to protect earnings at exporters.
The Japanese currency fell to 116.02 versus its U.S. counterpart from 115.81 in late New York trading, where it reached 115.54, its strongest level since Feb. 21, 2001. Against the euro, it stood at 117.38 from 117.14.
Japan has sold $33 billion of its currency between May 22 and June 28 to thwart a 12 percent gain in three months, analysts said. The advance erodes profits companies earn on overseas sales when the government is trying to nurture an export-led recovery, analysts said. Exports accounted for half the first quarter's 1.4 percent growth, the first expansion in a year.
``We are on alert, since the Japanese government can come in anytime to sell its currency,'' said Minoru Shioiri, foreign exchange manager at Kokusai Securities Co. ``They have to help exporters, which are the sole engine of this rebounding economy.''
The yen pared its decline against the dollar as Dow Jones Industrial Average futures for September delivery fell, suggesting the index will extend a seven-day decline, its longest losing streak since September, when stocks begin trade today.
Mazda
Economic and Fiscal Policy Minister Heizo Takenaka yesterday said he intended to discuss policy responses to the rising yen at the Bank of Japan policy meeting which concluded yesterday.
``According to Japan's economic fundamentals, an extremely volatile move in the currency must be met with appropriate measures,'' Takenaka said yesterday.
Mazda Motor Corp.'s second-half profit may be hurt if the yen holds at 116 yen, said Lewis Booth, president of Japan's No. 5 automaker, yesterday.
Mazda, a third owned by Ford Motor Co., predicted in May it will generate full-year group net income of 20 billion yen ($172 million), in the year that ends on March 31. The forecast is based on an average exchange rate of 125 yen per dollar.
The automaker is ``fully hedged'' for the first half of the fiscal year, which will end on Sept. 30, Booth said, indicating his company has market positions that will protect it in case the yen strengthens further.
Mazda has ``some cover'' in the second half of the fiscal year, Booth said, indicating the company may suffer at least some losses if the yen rises during that period. He spoke yesterday to reporters gathered for auto conference in Tokyo.
Greenspan
The dollar may also strengthen against the yen after Federal Reserve Chairman Alan Greenspan yesterday cautioned investors against expecting the dollar to decline.
``There may be more forecasting of exchange rates, with less success, than almost any other economic variable,'' Greenspan told the Senate Banking Committee yesterday, describing his comment as a ``flag of caution'' amid currency market predictions that the dollar would keep falling in value.
``Greenspan's remarks may help the dollar to rebound,'' said Kazuyuki Harada, who runs Sumitomo Marine Asset Management Co.'s 3.5 billion yen ($30.1 million) Dollar Yen Strategy Fund. ``The dollar has already corrected significantly and we think the bottom of its decline is around 115.'' Harada bought dollars this month.
The U.S. currency may extend its decline against the euro from a 2 1/2-year low on concern U.S. stocks will slide further, eroding demand for the currency.
Extending Losses
Even as Greenspan yesterday said the U.S. economy is gaining momentum and can weather a loss of faith in corporate honesty, the Standard & Poor's 500 Index fell 1.9 percent, extending its loss to 22 percent this year. The declines grew as companies including Bristol-Myers Squibb Co., Qwest Communications International Inc., and WorldCom Inc. said they're under investigation, feeding concern companies are misstating earnings.
``Since there is no sign this stock decline will stop anytime soon, and with the U.S. accounting system now in doubt, we cannot buy U.S. stocks at the moment,'' said Yasuhiro Miyata, manager for investment planning at Dai-Ichi Mutual Life Insurance Co., Japan's second-largest life insurer, which had 2.9 trillion yen of foreign assets as of March. His company sold dollars last week, Miyata said.
Following Greenspan, Treasury Secretary Paul O'Neill also gave the dollar some support yesterday when he told reporters in Kyrgyzstan there was no change in the Bush administration's ``strong dollar'' policy.
In other trading, the dollar was little changed at $1.4500 Swiss francs from 1.4497 in New York. It stood at $1.5745 per British pound from $1.5758 in New York. |
