Dollar Falls on Yen, Sterling Stays Strong
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By DAN MOLINSKI
June 27, 2007; Page C14
The dollar slumped against the yen after Japan's government expressed concerns over persistent weakness in its currency, sparking fears of a sudden spike in the yen.
Japanese Finance Minister Koji Omi warned about the risks of one-way currency bets and said the government is watching the yen's foreign-exchange levels "very closely."
Foreign-exchange positions have been one-sided in favor of yen weakness through a mechanism called the carry trade, in which investors borrow yen to take advantage of Japan's ultralow interest rates, and then sell the yen to buy higher-yielding currencies.
Warnings about yen weakness by Japanese officials have been made in the past, but analysts noted comments have come more frequently in recent weeks and sound more ominous.
"The shift in rhetoric, although subtle, implies yen undervaluation that should eventually correct in line with fundamentals," said Naomi Fink, currency strategist at BNP Paribas in New York.
Late in New York, the dollar was at 123.30 yen, down from 123.58 Monday, while the euro was trading at $1.3463, just down from $1.3465. The euro was at 166.02 yen compared with 166.48. The dollar was at 1.2279 Swiss francs, unchanged.
Elsewhere, sterling hit a nearly two-month high of $2.0017 after Bank of England Deputy Governor John Gieve said U.K. interest rates may not be high enough to bring credit and nominal demand growth down to sustainable levels. The currency finished at $1.9995, up from $1.9976. |
