Dollar Rises Against the Yen, Mark as Clinton Concern Wanes, Stocks Rise
Dollar Rises vs Yen, Mark as Clinton Concern Wanes, Stocks Rise
New York, Sept. 14 (Bloomberg) -- The dollar rose against the yen for the first time in three days as U.S. stocks gained and amid expectations President Bill Clinton won't be forced from office.
Independent Counsel Kenneth Starr's report, released Friday, contained few surprises about Clinton's affair with former White House intern Monica Lewinsky, analysts said. Furthermore, weekend polls showed a majority of Americans said Congress should censure Clinton rather than impeach him. ''The market (last week) had priced in the worst possible news on Clinton,'' said Marc Chandler, senior currency strategist at Deutsche Bank Securities. The dollar bounced back because ''that worry doesn't seem as justified,'' he said.
In late New York trading, the dollar climbed to 132.63 yen from 130.95 Friday in New York, paring more thank half of last week's 2 percent decline that left the dollar little changed versus the yen this year. The dollar also rose to 1.6975 marks from 1.6935 and gained versus other European currencies.
Traders bought dollars in European trading on expectations U.S. stocks would extend Friday's rally. The U.S. currency held its gains in New York trading as the Dow Jones Industrial Average rose. Global investors buying U.S. equities need dollars to pay for them.
Still, the dollar gave back some gains in late afternoon trading amid concern the Federal Reserve may cut interest rates to spur growth in the U.S. and elsewhere. Lower rates would diminish the appeal of dollar deposits and bonds.
Censure vs. Impeachment
Clinton's lawyers said that while the president admitted making mistakes, he did nothing that warrants impeachment or resignation. Much of the U.S. public sided with that view.
In a USA Today/CNN/Gallup poll, 60 percent of respondents said Congress should vote to censure Clinton for lying about his relationship with Lewinsky, yet 66 percent said he shouldn't be impeached.
Other polls by Newsweek, the Washington Post and ABC news, CBS News, and the Los Angeles Times show similar results, and that most U.S. adults approving of Clinton's job performance. ''President Clinton may get off with a censure rather than impeachment,'' said Tony Norfield, chief economist at ABN Amro in London. ''However, his weakened position does not help confidence in U.S. leadership to help resolve world financial problems, which leaves the dollar vulnerable.''
Many investors had shunned the dollar in recent days on concern Starr's findings may prompt Congress to impeach Clinton, diverting the country's attention from economic matters and possibly resulting in legislative gridlock.
Any signs the House of Representatives may start impeachment proceedings could spur more dollar selling, some traders said.
Japan's Woes
The dollar was also helped against the yen as investors and traders turned their attention to Japan's financial problems. ''The market is rethinking whether the dollar's recent drop is really warranted,'' said Ben Strauss, a trader at Bank Julius Baer, who sees the dollar climbing as high as 139 yen this week.
Japanese bankruptcies rose for the 20th straight month in August, and the parliament is still wrangling over a plan to reform the banking system, burdened with as much as $1 trillion in problem loans.
To be sure, the U.S. currency could be held back on concern about slower U.S. growth and the prospect for lower interest rates as turmoil in emerging markets saps growth worldwide. ''The Federal Reserve is under pressure to play the role of the world's, and not just the U.S.'s, central banker and thus is very aware of the deteriorating international climate,'' said Gerard Lyons, chief economist at DKB International in London. Still, he said, ''the pace of easing may take longer than the world economy needs, or the financial markets expect.''
Troubles in Brazil -- Latin America's largest economy --are of particular concern. The country is struggling to stem an exit of capital that's surpassing $1 billion a day and sent the country's Bovespa stock index tumbling more than 13 percent last week.
Euro Bulls
The dollar may also face an uphill battle against the mark in coming weeks as investors speculate that the planned single currency, which will supplant the mark in January, will challenge the dollar as an important global currency. ''We think the euro will rival the dollar as a reserve currency,'' said John DeBeer, a portfolio manager at Loomis & Sayles, which oversees $43.2 billion. ''We look for further strength in the mark.''
Elsewhere, sterling rose to $1.6770 from $1.6727. The dollar rose to 1.3995 Swiss francs from 1.3913 francs and to 5.6910 French francs from 5.6860 francs. It also rose to 1676 Italian lire from 1672 lire. The U.S. currency fell to 1.5102 Canadian dollars from 1.5138.
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