Dollar/yen ends off, U.S. assets seen
less of a deal
NEW YORK, May 24 (Reuters) - The dollar slipped against
the yen on Monday amid fears the Bank of Japan might
intervene to keep its currency from falling too far too fast.
The dollar also took a hit as falling U.S. blue chip stock prices
and a poor showing in the bond market made investors less
confident that U.S. assets are likely to provide a better return on
their money.
Overnight, talk by Japanese officials sparked concern that Japanese authorities might step in to
prop the yen, which sank to seven-month lows against the dollar last week, as the possibility of
higher U.S. interest rates loomed larger.
''The closer you get to 125 yen, the more verbal chattering you get out of Japan,'' said Kathy
Jones, director of futures research at Prudential Securities, Inc.
''People are reluctant to push (dollar/yen) too hard at this stage of the game,'' she added.
A break of important support near 123.50 yen sent the dollar tumbling, and a decline of nearly 175
points in the Dow Jones industrial average gave it the momentum to drop briefly below 123,
dealers said.
The dollar finished lower against the yen at 123.00/10 from 123.55/60 at the open of U.S.
markets.
Meanwhile, the euro crept higher to finish at $1.0595/02 from $1.0580/85, as poor U.S. market
performance helped take the edge off the dollar's strength.
Overnight, comments from Japan's Vice Finance Minister for Foreign Affairs, Eisuke Sakakibara,
that the ministry will carefully monitor forex market movements doused a small blaze as the dollar
climbed near 125 yen.
Talk of yet another stimulus package to revive Japan's ailing economy, this time from eight of
Japan's major banks totalling three trillion yen ($24 billion), also helped give the yen support versus
the dollar.
Rumors that the Argentine government might devalue its currency and fears that that could spur
another round of financial contagion in Latin America also prompted some dollar selling, traders
said.
But dealers and market analysts said the dollar's slide against the yen and euro would unlikely to
last, given the continued vigor of U.S. economic growth.
''The correction in the stock market is really a drop in the bucket in terms of overall gains,'' said
David Gilmore, partner at Foreign Exchange analytics, adding that Monday's share slide poses no
serious treat to the dollar.
Meanwhile, sterling gained against the dollar from a weaker start to U.S. trading, but not before
sliding to its weakest point in six weeks.
BoE MPC member-designate Sushil Wadhwani's comment Monday that cable seems overvalued
came as the latest in a string of protests from Bank of England officials against cable's recent
strength.
The talk helped press sterling to its weakest point since April 7.
''There is the believe that the U.K. wants to see sterling a little bit weaker,'' a trader at a large
European bank said.
Britain's currency opened softer versus the dollar after reports that its economic growth was nearly
stagnant in the first three months of the year made investors more suspicious that a rate cut by the
BoE could not be far behind.
BoE officials have recently denied talk of lower interest rates.
Cable was able erase its early losses, edging up to $1.5983/93 from $1.5977/87 at the open.
In other trading, the dollar fell to Canadian $1.4550/60 from $1.4610/20 and dropped to
1.5105/15 Swiss francs from 1.5130/40 Swiss francs.
The Australian dollar closed higher at $0.6590/95 from$0.6567/72 at the open.
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