Despite what this article says, I think the BOJ's problem is too much USD to sterilize and recycle. Some good numbers on the extent of the operation though:
Yen Poised for Biggest Weekly Advance Against Dollar This Year
Sept. 19 (Bloomberg) -- The yen headed for its biggest weekly gain this year against the dollar in New York trading on speculation Japan's economic growth will accelerate, boosting demand for the country's assets and currency.
``The economy has been doing better and the stock market has rallied,'' spurring demand for yen, said Adrian Schmidt, head of currency strategy at Royal Bank of Scotland in London.
Japan's currency has climbed more than 1.9 percent against the dollar since last Friday, its steepest weekly gain since December. It was trading at 115.06 yen as of 7:48 a.m. in New York, from 115.24 yesterday. The yen may trade between about 113 and 117 in coming weeks, Schmidt said. The dollar declined to $1.1308 per euro from $1.1255 yesterday.
The Nikkei 225 Stock Average rose this week to a 15-month high, helping push the yen to its highest against the dollar since February 2001 at one point yesterday. That surpasses levels at which the Bank of Japan has sold yen this year to protect exporters. Some traders speculated the BOJ may refrain from selling before this weekend's meeting of Group of Seven finance ministers in Dubai.
The Japanese government will raise its forecast for economic growth in the year to March 31 to as much as 2.5 percent from 0.6 percent, as exports, housing and investment pick up, Kyodo News reported, citing officials it didn't identify. The economy grew at a 3.9 percent annualized pace in the second quarter.
``There are absolutely good reasons for the yen to appreciate,'' said David Mann, a currency analyst in London at Standard Chartered Plc, a bank which makes about two-thirds of its profit in Asia. The bank expects the yen to end this quarter at 115 against the dollar.
Goldman Sees Shift
Japan may allow the yen to appreciate on increasing evidence the world's second-largest economy is accelerating, according to Goldman Sachs Group Inc., the fifth-largest trader in the global currency market, according to a Euromoney magazine survey.
The fastest growth in 2 1/2 years in the second quarter may prompt the Ministry of Finance to allow the yen to trade between 105 and 117 yen, Jim O'Neill, head of economic research at Goldman, wrote in a note to investors today.
Gains for the yen may be limited after Finance Minister Masajuro Shiokawa indicated Japan will sell its currency to stem its rise. The yen has strengthened as much as 2.53 yen against the dollar this week.
``A rise of 2 yen per dollar in just one week would yield a big blow'' to the economy and Japanese companies, he said. ``We must take actions against such moves. The government cannot help but to send warnings against rapid moves in the yen.''
The Group of Seven industrialized nations, meeting in Dubai this weekend, will discuss undervalued Asian currencies including Japan's and China's, Reuters said on its Web site, citing an unidentified U.K. Treasury official.
`Rapid Move'
The Bank of Japan sold a record 9.03 trillion yen ($78.3 billion) this year through July to stem gains in the currency that threaten the country's export-led recovery, central bank figures show.
After refraining from entering the currency market between July 30 and Aug. 27, Japan sold about 2 trillion yen this month, the Asahi newspaper said yesterday, without saying where it obtained the information.
The yen's gains may hurt companies such as Toyota Motor Corp., the country's biggest automaker, and Canon Inc., which makes about three-quarters of its revenue outside Japan. Exports account for 10 percent of Japan's economy.
``Japanese authorities aren't confident about the sustainability of economic growth,'' said Hiroyuki Yamada, who helps manage $1 billion in overseas debt at Daiwa SB Investments Ltd., a unit of Japan's second-largest brokerage. ``Any further gain in the yen is a headache for them.''
Last Updated: September 19, 2003 07:48 EDT |
