Intervention cuts yen's global role-Fed's Olson
Tuesday 24 January 2006, 8:43pm EST
(Updates with background, additional comments, paragraphs 4 to end)
WASHINGTON, Jan 23 (Reuters) - U.S. Federal Reserve Board Governor Mark Olson said on Monday that currency intervention by Japan is one factor that has diminished the yen's global role in comparison with the U.S. dollar and the euro.
Speaking to an audience at Susquehanna University in Selinsgrove, Pa., Olson said he thought there were a number of reasons the yen did not circulate as broadly outside Japan as the dollar and the euro do outside their currency areas.
"Number one, I think is that it lacks some stability. Number two, the Japanese are very much involved with intervening on behalf of their currency at times ... it is subject to a lot more potential volatility. And third you don't have the liquidity in the market," he said in answer to a question from the audience. An audio feed of his remarks was monitored in Washington.
Tokyo spent a record 35 trillion yen in 2003 and the first three months of 2004 combined to stem the yen's rise. It has stayed out of the market since March 2004.
Asked about the inversion of the U.S. yield curve, Olson said the U.S. central bank was not in the business of trying to determine the shape of the U.S. yield curve, but that it was important to understand the factors behind market yields.
"Whatever is happening with respect to the (U.S.) yield curve. it is an international phenomenon," Olson said, adding that "you would find exactly the same line" in looking at yields in Germany, Britain and Japan.
"What we try to do is understand the reason, but we don't try to determine what it should appropriately be," he said.
Before taking questions, Olson spoke broadly on issues relating to productivity, globalization and inflation, but steered clear of commenting directly on the outlook for the U.S. economy and interest rates.
As he had in similar remarks on Jan. 11, he said an expanding global workforce as Russia, China and other countries turned toward free markets had helped dampen wage rates around the globe and lowered inflation pressures. He said, however, this "seminal" shift eventually would run its course.
today.reuters.com |
