Tom,
There could be more selling and opportunities today..but who is selling?
Victor
Dollar Falls Against Yen After U.S., Global Stock Markets
Tumble
Dollar Little Changed vs Yen Amid Concern Over U.S. Stock Drop
Tokyo, Sept. 18 (Bloomberg) -- The dollar was little changed against the
yen, reversing course repeatedly, as concern Japan won't quickly stabilize its
financial system was offset by worry falling U.S. stocks will sap demand for
dollars. ''There still remains concern over how much the Dow Jones
Industrial Average will fall before the weekend,'' said Hidenori Watanabe,
chief dealer at Dai-Ichi Kangyo Bank Ltd. ''That's weighing on the dollar.''
The dollar was quoted at 132.04 yen, little changed from 131.85 yen in late
New York trading yesterday. It was quoted at 1.6927 marks, down from
1.6964 marks yesterday.
The U.S. currency briefly rose as high as 132.45 yen immediately after
Finance Minister Kiichi Miyazawa said he didn't think Sept. 22 -- when
Japanese Prime Minister Keizo Obuchi is set to meet U.S. President Bill
Clinton -- was the deadline for passing of legislation aimed at shoring up the
banking system. ''Miyazawa's comments dashed hopes for rapid Japanese
action to sort out the banks' problems,'' said Tetsu Aikawa, a foreign
exchange manager at Sanwa Bank Ltd. ''Those who had bought yen on
expectations Japan would reach an agreement as early as today started
dumping the yen.''
Yet Miyazawa also said he would attend, if requested, a meeting today of
ruling Liberal Democratic Party and opposition leaders, following all-night
talks during which the LDP made concessions on the bills.
Bowing to an opposition demand, the LDP consented to a government
takeover of financially troubled Long-Term Credit Bank of Japan Ltd. Yet
the opposition and LDP are still at odds over whether public funds should be
used to support the bank.
Hedge Funds
The U.S. currency earlier plunged as low as 131 yen following declines in
global stocks, prompting investors to sell dollars on expectations slower
growth worldwide will stunt U.S. corporate earnings.
The Dow yesterday dived 216.01, or 2.7 percent, to 7873.77, snapping a
four-day, 474-point rally. Brazil's Bovespa stock index lost 4.8 percent.
Bloomberg's Europe 500 Index dropped 3.9 percent, reflecting declines in
most European benchmarks.
In Asia, Japan's benchmark Nikkei 225 stock index is down 0.05 percent to
13,851.80, after plunging 2.4 percent to a 12 1/2- year low yesterday. Hong
Kong's Hang Seng Index extended its decline, falling more than 2 percent in
early trading.
Traders said U.S. hedge funds have been the main sellers of dollars because
most of the largest hedge funds, which manage money for wealthy individuals
and institutions, have lost money since markets around the world plunged
after Russia devalued its currency in August. ''The hedge funds need to buy
yen to pay off their yen loans'' that financed dollar-denominated investments
in emerging markets, said Takeshi Imamichi, a foreign exchange manager at
Industrial Bank of Japan Ltd.
Many hedge funds used so-called yen carry trades to borrow yen at low
rates in Japan, then converted the yen to dollars to invest in higher yielding
securities elsewhere.
Repatriation
Many traders said that the dollar will be weaker against the yen because they
expect Japanese investors, mainly banks, will likely sell dollar-denominated
securities to bring profits home before the half-year book closing on Sept.
30.
Because the Nikkei stock index has fallen more than 10 percent this year,
Japanese banks are concerned about their eroding capital base. The Bank
for International Settlements requires internationally active banks to maintain
a capital-to- assets ratio of at least 8 percent. To boost their capital base for
the end of the half-year, Japanese banks are repatriating profits.
Individual investors, too, may bring home funds invested abroad to profit
from the yen's recent gains against the dollar, said Hiroshi Sakuma, a foreign
exchange manager at Barclays Bank Plc. ''If the Nikkei average continues to
fall, Japanese individual investors will sell whatever they hold in foreign
currencies and convert the proceeds into yen,'' Sakuma said. ''The
dollar-yen rate is not moving based on economic fundamentals right now.
What is deciding the direction of the dollar is position adjustments by various
investors'' who want to realize gains by selling the dollar.
Junya Ota, a foreign exchange manager at Mitsubishi Trust & Banking Co.,
said the dollar will likely trade between 130 yen and 137 yen this month. It
could rise after the second half of Japan's business year begins on Oct. 1. ''If
investors are convinced that the Dow is merely in a correction process,
Japanese institutional investors will start investing abroad again,'' Ota said.
Kuroda
Haruhiko Kuroda, director general of the Finance Ministry's International
Bureau, reiterated today that the yen will keep strengthening against the
dollar. ''The correction of the yen's excessive weakness against the dollar
has started and will continue,'' Kuroda told reporters when entering the
ministry.
In other trading, the dollar was quoted at 1.3897 Swiss francs, down from
1.3910 Swiss francs in late New York trading yesterday. The British pound
was quoted at $1.6823, down from $1.6825. The mark was quoted at
78.05 yen, up from 77.93 yen.
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