''I'm thinking that even income tax cuts won't work because if they have
more money, all they are going to do is save it,'' said Chris Melendez,
senior dealer at Sanwa Bank California."
Dollar Rises for Fifth Consecutive Session
06:46 p.m Apr 02, 1998 Eastern
By Al Yoon
NEW YORK (Reuters) - The dollar rose against the yen for the fifth
straight day Thursday after a weak report on Japanese business
sentiment, but was held back by speculation that Japan would boost its
economy with income tax cuts.
The U.S. currency also extended gains against the mark amid doubts over
the success of Europe's planned monetary union.
In late trading, the dollar was at 133.68 yen, up from 133.62 Wednesday.
It rose to 1.8546 marks from 1.8540.
The yen was pressured after the Bank of Japan said its quarterly report
of business sentiment of large manufacturers plummeted to minus 31 in
March from minus 11 in December. The level was the lowest in 3-1/2
years.
The yen was also pressured after U.S. Trade Representative Charlene
Barshefsky criticized Japan's efforts at reforming its financial system,
known as the ''Big Bang.'' Japan's program was too vague on key issues
and often delays implementation of deregulation measures, she said.
''Barshefsky said the Big Bang fell short of expectations and people
bought some dollars on the back of that,'' Seth Garrett, chief dealer at
Credit Suisse First Boston, said.
Traders earlier reported strong interest to sell dollars for yen had
originated out of Asia after Japan daily Nihon Keizai Shimbun newspaper
quoted sources saying at least half of Japan's 16 trillion yen ($124
billion) stimulus package announced last week would be in the form of
tax cuts and public spending programs.
But with one of the highest rates of savings in the world, traders
questioned whether income tax cuts would do the job.
''I'm thinking that even income tax cuts won't work because if they have
more money, all they are going to do is save it,'' said Chris Melendez,
senior dealer at Sanwa Bank California.
The dollar retained its vigor against the mark, propped throughout the
session following comments from Bundesbank council member Reimut
Jochimsen that raised doubts about the strength of the planned European
Economic and Monetary Union (EMU) and its currency, the euro.
Jochimsen said in an interview with Reuters that broad membership in EMU
could prove disastrous as several member countries, including Italy and
Belgium, have fallen short of the required fiscal rectitude.
''People realize coming into EMU they have to reduce their exposure in
all European currencies,'' a trader at a French bank in New York said.
In other trading, the dollar fell to 1.5330 Swiss francs from 1.5343 on
Wednesday and rose to Canadian $1.4204 from C$1.4176. The pound was
lower at $1.6635 from $1.6710.
Copyright 1998 Reuters Limited. |
