Dollar Falls to 2-Week Low vs Yen as Japan Says It's Poised to Buy Yen
Dollar Falls vs Yen on Japan Threats to Sell Dollars (Update1) (Adds yen weakness detail in 11th paragraph. Updates rates.)
New York, Aug. 19 (Bloomberg) -- The dollar fell a third day against the yen to a two-week low after top Japanese finance officials warned again that the government is poised to sell the U.S. currency to support the yen, down 9.5 percent this year. ''The time for Japan to intervene to push up the yen is near,'' said Eisuke Sakakibara, vice finance minister for international affairs. Also, Haruhiko Kuroda, director general of the ministry's International Bureau, said ''the weak-yen trend appears to have turned around.'' ''There's a lot of talk from Japan about intervention, and they could well back that up with some action,'' said Shahid Ikram, who helps oversee $25 billion at Commercial Union Asset Management in London. ''If they did, the dollar might go to 138 or 139'' yen, though any rally will prove short-lived, he said.
In late New York trading, the dollar fell to 144.01 yen from 144.92 yesterday. Earlier, it dropped to 143.65 yen, its lowest level since Aug. 6. In a week, the dollar has slumped more than 2.5 percent from an eight-year high of 147.66 amid almost daily Japanese threats that dollar sales were imminent. ''It's certainly a good way of talking the dollar down without spending any money,'' said Lee Kassler, chief currency trader at Israel Discount Bank.
The U.S. currency was little changed at 1.7977 marks from 1.8003 after a Bundesbank council member hinted German interest rates won't be raised this year. A cash crunch in Russia is also supporting the dollar, helping it gain 1.3 percent this month. Falling stocks and bonds in Russia have led many traders to shun Germany, Russia's largest lender and trading partner.
Mark-Yen
Speculation that Japan may soon bolster the yen, combined with Russia's woes, is prompting some traders to buy yen and sell marks, Kassler said. The mark is down more than 3 percent against the yen since Aug. 11.
Sakakibara, who will attend a private seminar this week in Colorado, said he plans to contact U.S. Deputy Treasury Secretary Lawrence Summers. He didn't say what he would discuss.
Japan and the U.S. spent an estimated $6 billion to buy yen June 17, the day after the dollar reached a then eight-year high of 146.78 yen.
Although the joint action sliced as much as 13 yen off the dollar's value in following days, the U.S. currency eventually recouped the losses.
The weakened yen lowers the price of Japan's exports, putting pressure on Asian trade rivals, many of whose currencies also have lost ground in the last year. It also means U.S. companies operating in Japan earn less when repatriating overseas profit.
A jump in Japanese stocks helped drive the yen higher, said David Herro, who oversees $1.5 billion in international stocks at Oakmark Investments in Chicago. The Nikkei 225 stock index rose 2.27 percent to 15,406.34. ''We're starting to find more value'' in Japan, said Herro, who's boosted his holdings of Japanese stocks six months ago to about 15 percent from zero. He said Canon Inc. and Citizen Watch Co. were two of his holdings.
Mark Losses
The mark was little changed against the dollar after Bundesbank council member Klaus-Dieter Kuehbacher said he sees the key short-term interest rate for the 11 countries introducing Europe's single currency in January at 3.30 percent, Dow Jones Newswires reported. That's where Germany's benchmark securities repurchase rate is now set.
Kuehbacher ''mentioned that a rate hike this year is not on the cards,'' said Reto Feller, head of European spot trading at Commerzbank. ''That's bringing pressure on the mark.''
If German rates stay on hold, that means the money-market return on mark-denominated deposits also won't rise. Three-month dollar deposits currently pay 5.69 percent, while mark deposits pay 3.50 percent.
The mark is also being hurt by Russia's financial troubles. The country's RTS stock index fell more than 9 percent after the government delayed an announcement about rescheduling $40 billion in ruble-denominated debt. German banks have lent Russia about $30 billion, mostly in non-ruble loans. ''The Russian situation makes people more comfortable holding dollars against European currencies,'' said Ivar Bjornstad, treasurer in charge of foreign exchange at Den norske Bank.
The dollar gave up early gains versus the mark as traders speculating the mark would fall further bought it back when the currency failed to drop as much as expected.
In recent days, traders has borrowed marks, then sold them ''short'' on expectations Russia's woes would drag the mark far down. That would let them buy the marks back cheaper at a later date, then pocket the difference.
Elsewhere, sterling rose to $1.6222 from $1.6168 yesterday. The dollar fell to 6.0265 French francs from 6.0395 francs and to 1.5060 Swiss francs from 1.5101 francs. It was little changed at 1774.15 Italian lire from 1776.90 lire. The U.S. currency rose to 1.5340 Canadian dollars from 1.5287.
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