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Message 5367290
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Dollar Rises vs Yen on Hints Japan Won't Boost Yen (Update2)
(Updates rates. Fixes transmission garble in tour.)
New York, July 30 (Bloomberg) -- The dollar surged against
the yen after Japanese Finance Minister Kiichi Miyazawa said the
yen should move on its own, suggesting the Japanese government
won't soon sell dollars to prop up the sagging yen. ''At this point everyone realizes that they're not going to intervene'' in the currency market, said Jeffrey Yu, senior
currency trader at Sanwa Bank. ''If it's true Japanese officials
will let the market decide where the dollar should be, the dollar
will go higher.'
In late New York trading, the dollar rose to 143.72 yen from
142.40 yen yesterday. It could climb as high as 144.50 yen this
week, Yu said. The dollar also rose to 1.7805 marks from 1.7735.
The Japanese currency and stock market should move on their own, without government manipulation, Miyazawa said at his first news conference as a member of Prime Minister Keizo Obuchi.
Miyazawa said joint currency market intervention, like the one conducted in June by Japan and the U.S., ''shouldn't happen often.''
His remarks signaled that Japan won't soon sell dollar. While that action sent the dollar tumbling, it has since recouped most of the lost ground. 'Extremely Severe'
The yen was also dragged down as Taichi Sakaiya, the new
head of Japan's Economic Planning Agency, said the economic slump
is ''extremely severe'' and that the Bank of Japan will keep the
country's interest rates low for the time being.
Sakaiya echoed Miyazawa, saying currency exchange rates
should reflect financial markets' perception about the economy,
and not be influenced by government manipulation.
Low rates in Japan, compared with higher U.S. rates, leave
global investors little incentive to deposit money in Japanese
banks or buy the nation's government bonds.
Earlier, the U.S. currency got a leg up against major
currencies as U.S. stocks and bonds gained, luring investors to
dollars needed to buy the financial assets.
''The dollar's been trading tick for tick with stocks, so
with the market up, we got a dollar rally,'' said Terry Haggerty,
a currency trader at Wells Fargo Bank in San Francisco.
The benchmark Dow Jones Industrial Average rose 111.99
points to 902.95, while the bellwether 30-year Treasury bond
gained, pushing its yield down 3 basis points to 5.73 percent.
Investors snapped up the securities on hope U.S. interest rates
won't be raised any time soon.
Earlier Losses
The U.S. currency fell in earlier trading to a two-month low
against the mark as reports suggested Germany's economic recovery
is gathering steam, reviving speculation the Bundesbank may raise
its benchmark interest rate this year.
In Germany, the Handelsblatt newspaper said its index of
leading economic indicators for Eastern German rose in July,
fostered by strong factory orders and a more stable construction
industry. That drove the mark higher.
''The German economy is picking up, fund managers like
German stocks and the Bundesbank may nudge up the repo rate by
the end of the year,'' said Earl Johnson, an international
economist at Bank of Montreal in Chicago. ''We've got a lot of
positives for the mark.''
The newspaper's economic barometer for the East rose to 4.7
percent this month, up from a revised reading of 4.4 percent in
June. That's up 1 percentage point from a year ago
The dollar fell as low as 1.7635 marks, its lowest level
since June 4. It could decline to as low as 1.70 marks by the end
of the year, Johnson said.
Bundesbank figures, meantime, showed German retail sales
rose 0.5 percent in May from April and 0.7 percent from the year-
ago period, compared with an earlier estimate of an 0.3 percent
year-on-year increase.
European Recovery
The dollar is down 4.8 percent against the mark since rising
to a eight-month high on April 2, amid signs European economies
are picking up pace, boosting confidence in the region's planned
single currency and raising expectations German interest rates
may be headed higher.
In another sign investors are warming to German financial
assets, the bellwether DAX stock index is up almost 40 percent
this year. Higher German interest rates would help the mark by
making mark deposits and bonds more attractive. The Bundesbank
last raised its benchmark securities repurchase rate, to 3.30
percent, in October.
The yen rose against the dollar in Asian trading after
Japan's new finance minister suggested he will push for economic
reform more quickly than some analysts had expected.
''Real change is on the horizon,'' said Paul Chertkow, head
of global currency research at Bank of Tokyo-Mitsubishi Ltd. in
London, who sees the yen strengthening to 125 per dollar by year-
end. ''This is very favorable for the yen, and it proves the
initial reaction to Miyazawa's appointment was incorrect.''
'Top Priority'
Miyazawa said he will meet members of the ruling Liberal
Democratic Party's tax panel next week to discuss details of
proposed tax cuts -- sooner than many traders and investors
expected. He also said that during the parliamentary session
starting tomorrow he will urge passage of six bills to help banks
get rid of bad loans.
''My top priority is to show the nation what measures are to
be done and in what order -- to clarify the order of policy
priority,'' Miyazawa said at a press conference today.
Japan's banks have an estimated 77 trillion ($542 billion)
in problem loans, making it harder for them to make new loans,
eroding investor confidence in the financial system and forcing
some banks to go under.
Elsewhere, sterling fell to $1.6353 from $1.6425 yesterday.
The dollar rose to 5.9710 French francs from 5.9440 francs and to
1.4905 Swiss francs from 1.4844 francs. It also rose to 1757
Italian lire from 1747.50 lire. It was unchanged at 1.5064
Canadian dollars.
Forgive the format, it came from an image file, and was translated. Screw their security! |
