Easy money begets lower $/yen which begets $ inflow and foreign money outflow. Nothing new for us. But for the records....
Tuesday October 6, 12:45 pm Eastern Time
(Note: this article is ''in progress''; there will likely be an update soon.)
Dollar/yen breaks down at US noon, mark/yen exited
NEW YORK, Oct 6 (Reuters) - The dollar was lower at midday, plummeting against the yen after a key technical level broke overnight and amid massive mark/yen unwinding, dealers said.
Meanwhile, early gains versus the mark were erased despite gains in the Dow Jones industrial average and other global bourses, with selling fueled by ongoing expectations the United States will cut interest rates again to protect its economy.
''The bid is not good, a (Federal Reserve bank president) is saying they're worried about a credit crunch here ... it looks like easier money policy here overall,'' said Joe Cambria, chief dealer at Credit Suisse First Boston.
Federal Reserve Bank of Chicago President Michael Moskow said last week's federal funds rate cut was taken to cushion a prospective U.S. economic slowdown and ''less accommodative financial conditions domestically.''
Dollar/mark at noon was off at 1.6330/40, down from 1.6412/17 at the open and unchanged from Monday. Dollar/yen fell to 131.10/20 from 132.80/90 at the open.
The mark came under selling pressure early, first hit after the Bank of Spain cut its key money rate by a bigger than expected 50 basis points. Spain cut rates to ensure that European rates will convergence in time for currency union.
Analysts said the rate cut signaled convergence would happen at lower than expected levels. Europe's rate outlook sapped the mark's tone but some analysts doubted a near-term cut in Germany's repo despite comments from President Hans Tietmeyer on Monday that left the option open.
''They lowered some rates, they don't want a stronger euro against the dollar, and so there are mark/yen sales dominating this whole thing right now,'' said French bank dealer.
Traders cited rumors of European central bank dollar/mark buying at 1.6250 overnight, and also selling of mark/yen that exacerbated the move below 80.50.
Dollar/yen offers have grown since it broke through key technical support at 133.10 overnight, a level which represents the halfway point of the 128.90 to 137.19 September rise.
The backdrop of Japan's recession notwithstanding -- Japan said its annual growth would shrink by 1.8 percent instead of the 1.9 percent increase last predicted -- the yen gained as large funds continued unwinding profitable yen-carry trades to offset losses elsewhere, traders said.
''There's still a lot of profit in dollar/yen for some people and every opportunity they have to sell on rallies they are going to,'' said the French bank dealer.
(Note: this article is ''in progress''; there will likely be an update soon.)
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