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To: Radim Parchansky who wrote (74781)	8/20/1999 8:12:00 AM
From: Radim Parchansky	Respond to of 164684

Yen Falls From Seven-Month High Against Dollar Amid Yen-Selling Concern By Tom Giles Yen Falls vs Dollar on Concern Banks May Soon Sell (Update2) (Adds investor comment, euro detail from 4th paragraph.) London, Aug. 20 (Bloomberg) -- The yen retreated from a seven-month high against the dollar amid speculation the Japanese or U.S. central bank may soon sell yen to safeguard Japan's economic rebound. The yen had climbed for four days, rising as much as 4.5 percent against the U.S. currency, as investors bought Japanese stocks and as the Bank of Japan refrained from selling yen. ``I don't think there's a great desire to go on' increasing exposure to the yen, said Tony Spence, who helps oversee $25 billion at First Quadrant Ltd. in London. ``Pretty soon, the Bank of Japan may be back in to surprise the market.' The dollar rose to 111.82 yen in London trading from 111.24 yen late yesterday. It touched a seven-month low of 110.80 yen yesterday. The euro rose for a second day, to $1.0666 from $1.0626, after a report yesterday showed rising business confidence in Germany, which accounts for about a third of the euro region's economy. The dollar gave up some gains in late Tokyo trading as Japanese exporters and life insurers sold dollars in an attempt to protect the value of overseas earnings. As the U.S. currency weakens, those firms get fewer yen when they bring home dollar- based receipts. Rise Is `Speculative' Haruhiko Kuroda, Japan's vice finance minister for international affairs, kindled intervention fears today, reiterating his oft-stated refrain that ``a premature rise by the yen is undesirable, both for the Japanese economy and the global economy.' He said, ``The recent rapid rise by the yen has somewhat deviated from economic fundamentals and is speculative, and that is undesirable.' ``People can't buy yen aggressively when it rises above 111 as they still think Japan will intervene if the yen rises to 110,' said Hiroshi Sakuma, a foreign exchange-manager at Barclays Bank Plc. in Tokyo. The yen's strength versus the dollar is problematic on two fronts. First, by making Japan's exports more expensive, it threatens to sabotage economic improvement. Second, the dollar's weakness raises the price of imports to the U.S. and can lift the rate of inflation. Some traders bought dollars after National Westminster Bank Plc said in a report that ``the Chinese authorities are likely to announce a reduction in the renminbi's fixed value (to the dollar) of approximately 15 percent by mid-September. A devaluation of the Chinese currency might slow the pace of Asia's economic rebound, souring some investors on the entire region, including Japan. Still, the yen is likely to resume its rise as investors remain enamored of Japanese stocks and economic indicators point to recovery. Shares Are Cheaper Merrill Lynch & Co., the largest foreign brokerage in Japan, said Wednesday it will buy more Japanese stocks because the nation's economy is improving and Japanese shares are cheaper than those in other countries. The biggest U.S. brokerage raised the weighting of Japanese stocks in its model global portfolio to 14.82 percent from 13.75 percent, the second advance in two months. The move may encourage other investors to buy more shares. The Japanese currency earlier rose as high as 111.28 to the dollar immediately after the benchmark Nikkei 225 stock average jumped, increasing demand for yen to purchase shares. The Nikkei average rose, led by banks amid hopes of further industry consolidation after Industrial Bank of Japan Ltd., Fuji Bank Ltd. and Dai-Ichi Kangyo Bank Ltd. said they will form an alliance. ``Funds are flowing into Japan and this trend may continue,' said Hirokazu Note, chief trader at Sumitomo Bank Ltd. ``The Japanese monetary authorities may let the yen rise as long as stocks are rising, but they may need to halt its ascent, as the speed (of the rise) was quite rapid.' The euro was helped for a second day by an index released yesterday by the Ifo research institute, which indicated that German businesses grew more sanguine about their prospects for a third month running. The reading suggested recovery in the euro region may gather steam in the months ahead. In another harbinger of a brightening outlook in the euro region's largest economy, industrial production rose 0.3 percent in June, according to a revision of an earlier estimate which showed production was unchanged. quote.bloomberg.com