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To: long-gone who wrote (14887)	7/25/1998 11:40:00 AM
From: goldsnow	Respond to of 116759

Dollar Seen Rising Amid Speculation Obuchi Won't Spark Recovery in Japan Dollar Seen Rising Amid Speculation Obuchi Won't Spark Recovery New York, July 24 (Bloomberg) -- The dollar is likely to rise against the yen in coming days amid expectations that Keizo Obuchi, the new president of the ruling Liberal Democratic Party, won't act quickly to reform the banking system or spur an economic recovery when he becomes prime minister. ''He was foreign secretary. He likes to build consensus,'' said Sudhir Patel, manager of foreign exchange at NationsBank in Houston. ''Again we are going back to the slow-moving decision- making process Japan is known for. We'll definitely be testing 147 yen, the previous high, sometime next week.'' Traders expect the U.S. currency to slip against the mark amid growing expectations Germany will raise rates soon. That sentiment was fanned after Bundesbank council member Franz- Christoph Zeitler said money-supply growth in Europe ''is signaling a clear acceleration,'' and the Bundesbank's policy council ''will monitor this closely.'' For the week, the dollar rose 1.3 percent against the yen to 141.45 yen. The dollar rounded out the week at 1.7818 marks, little changed from last Friday. After Obuchi earlier today beat out two other contenders for the party's leadership, he reaffirmed his support for additional government spending and said thorough tax reform is necessary. He had already promised to cut more than 6 trillion yen ($42.55 billion) in taxes and boost spending by 10 trillion yen. Obuchi defeated Health and Welfare Minister Junichiro Koizumi and former Chief Cabinet Secretary Seiroku Kajiyama, both of whom investors considered to be more likely to take the steps necessary to power Japan out of its worst recession since World War II. ''Obuchi isn't the man that's going to turn Japan around,'' said Malcolm Gilroy, who oversees $100 million in assets at Laketon Investment Management in Toronto. ''The old guard of the LDP is still in power.'' The dollar could rise to 160 yen by year- end, he said. Obuchi, 61, is almost assured of becoming Japan's prime minister when the LDP-controlled parliament reconvenes July 30. While the yen could get a boost if Obuchi asks Kajiyama to become the Finance Minister, traders say that's unlikely because the two men, who used to be a part of the same LDP faction, no longer agree on policies and have since parted ways. Reports Next Week Little in the way of encouraging economic news is expected out of Japan next week. The government will release June industrial production Wednesday, which economists polled by Bloomberg News expect to rise 0.6 percent from May. The jobless rate, announced Friday, is expected to climb to a record 4.2 percent from 4.1 percent. High unemployment raises the likelihood the Bank of Japan won't soon lift its benchmark discount rate from a record low 0.5 percent. Japan's low lending rates give global investors little incentive to put money on deposit in banks or buy bonds. ''My view is that dollar-yen is a screaming buy anywhere near 140 yen,'' said Jeremy Fand, currency strategist at BankBoston. ''We're looking to a move toward 143.50 next week.'' The dollar climbed as high as 146.78 on June 16, a day before the U.S. and Japan jointly intervened in the currency market, selling dollars for yen, to boost the Japanese currency and send it as low as 136.02 yen. German Rates Speculation that Germany may raise interest rates in coming weeks will support the mark, traders said, especially after the Bundesbank's Zeitler hinted the central bank may raise the benchmark repurchase rate from 3.30 percent to slow the growth of money supply. Higher rates usually boost the mark by providing a better money-market return on mark deposits. German M3 money supply, the Bundesbank's primary guide to inflationary pressures, grew at a rate of 5.3 percent in June, speeding up from 4.4 percent in May. Money supply in Europe grew at a rate of about 6 percent in the 11 countries founding Europe's single currency on Jan. 1. ''Generally people like the mark following the lead of Bundesbank's Zeitler implying rates would have to rise,'' said BankBoston's Fand. The Bundesbank's role as de facto rate-setter for other European countries will be assumed by the European Central Bank on Jan. 1, the day the euro is scheduled to be introduced. The mark may also be supported by sentiment that Russia's economy may be on the mend. The Bank of Russia cut a benchmark interest rate 20 percentage points to lower borrowing costs and help kick-start growth. Some economists said the move may help revive the economy, beleaguered by falling stocks and a cash shortage that threatened Russia's ability to pay back debt and defend its currency. Those economic woes had soured investors on Germany and the mark because Germany is Russia's largest trading partner and creditor. ''People are feeling a little more stable with what's going on in Russia,'' said Lizbeth Goldberg, a currency saleswoman at Bayerische Hypotheken und Wechsel Bank. That's helping buoy the mark, she said. bloomberg.com@@NYEATwYAJ90fdOzi/news2.cgi?T=news2_ft_topww.ht&s=561201322