01/01 22:02
Yen Falls on Expectations Report Will Signal U.S. Quickening
By Christina Soon
Singapore, Jan. 2 (Bloomberg) -- The yen fell against the dollar on expectations a U.S. manufacturing report may signal the biggest economy will quicken in coming months, while Japan's third recession in a decade deepens.
The manufacturing index of the Institute for Supply Management, formerly known as National Association of Purchasing Management, probably rose to 46 this month from 44.5, according to a Bloomberg News survey of economists. While a reading below 50 signals contraction, gains in the index show the decline is slowing, analysts said.
``Today's numbers will push up the dollar against the yen,'' said Kentaro Fujikata, a trader at Tokai Bank in Singapore. ``The Japanese economy is bad, so we can't buy yen.''
The yen weakened to 131.91 against the dollar from 131.65 in New York yesterday. The yen last year had its largest annual drop against the dollar since 1979, having lost more than 13 percent. The euro hovered at 89.07 U.S. cents. Trading was less than usual because Japan's financial markets are closed until Friday, traders said.
``The market's expecting better-than-forecast NAPM numbers tonight and that's supportive of the dollar,'' said Loh Mei Ling, a research analyst at United Overseas Bank Ltd. in Singapore. ``Japan's fundamentals are still very weak so that will keep dollar-yen supported.''
The Conference Board's index of consumer attitudes released last week added to the optimism, as U.S. consumer confidence rose to 93.7 in December from 84.9 in November, heartening investors about the improving outlook for the economy.
In contrast to the U.S., 17,936 Japanese companies went bankrupt in the first 11 months of last year, 2.4 percent more than in the year-earlier period, according to Teikoku Databank Ltd., a credit research firm.
Japanese Authorities
The dollar was also supported as Japanese authorities may seek a weaker yen to boost the profits its exporters earn on overseas sales, a tool it used in 2001 to try to spur growth, traders said.
``We need to focus on the attitude of the Bank of Japan,'' said Carlos Cheung, chief foreign exchange dealer at Bank of East Asia Ltd. in Hong Kong. ``They may use a weaker currency to boost their exports. I have no doubt that the dollar will rise against the yen.''
The nation's Ministry of Finance and the Bank of Japan are willing to see the yen fall to as low as 140 yen against the dollar, the Mainichi newspaper reported this week, citing unnamed sources. The comments may prompt foreign exchange traders to bet against the currency, analysts said.
``It's very clear that the Japanese economy calls for a much weaker yen,'' said Greg McKenna, currency strategist at National Australia Bank Ltd. ``Both fundamentals and the authorities are not going to stand in the way of the yen heading towards the 135 level.''
Euro
The euro may gain against the dollar because the introduction of coins and notes for the 12 nations sharing the single currency is likely to boost demand, analysts said.
The euro yesterday became the official currency of Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
``There's a bit of positive sentiment from the introduction of the notes and coins,'' McKenna said.
While the pace of job cuts in the U.S. may be slowing, the prospects of further unemployment in the largest economy may still hamper economic growth, adding support to the euro versus the dollar, some traders said.
U.S. employers probably trimmed 168,000 jobs last month after payroll reductions of 331,000 in November and 468,000 in October. The Labor Department's jobs report on Friday is also expected to show the unemployment rate rose to 5.8 percent from November's 5.7 percent.
As businesses follow through on job cuts announced months ago, economists predict unemployment to rise for as many as nine more months to as high as 6.2 percent, according to the median of 39 forecasts in a Bloomberg News survey.
``We may not have a strong U.S. economy this year,'' Bank of East Asia's Cheung said. ``The U.S. economy usually depends heavily on the consumption of the population. Poor job numbers in the U.S. will push up the euro.'' |
