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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: bobby beara who wrote (5265)	2/2/1999 11:11:00 PM
From: Daniel Joo	Respond to of 99985

FYI Surging Japanese Bond Yields Lift Yen Sharply vs. the Dollar By STEPHANIE HOO Dow Jones Newswires NEW YORK -- The yen surged Tuesday against the dollar and the euro, boosted by a surge in Japanese government bond yields. As a result, the dollar and the euro fell sharply, tumbling about three yen. In the cross-trade, the dollar edged down against the euro on profit-taking as Monday's dollar highs were deemed overdone. Most Asian Equities Slide; Tokyo Slips as Rates Rise See more information on foreign-exchange trading from Briefing.com Late afternoon in New York, the dollar was trading at 112.14 yen, down from 115.05 yen late Monday in New York. The euro was trading at $1.1340, up from $1.1304 late Monday. The euro was also trading at 127.16 yen, down from 130.22 yen late Monday. The dollar's slide against the yen began early in Asian trading and continued steadily into North American hours as market players quickly rejiggered positions put on just last week when the dollar had soared above 116 yen and seemed poised for further gains. Last week, "the market got ahead of itself," said Grant Wilson, vice president for foreign exchange at Mellon Bank in Pittsburgh, Pa. "When the dollar got above 115 yen, people went long on dollars. They shot all their bullets and now they have no bullets left." Adding further weight to the dollar Tuesday, Japanese Vice Finance Minister Eisuke Sakakibara warned of growing U.S.-Japanese trade tensions. His remarks coincided with the dollar's first two-yen plunge early Tuesday. Mr. Sakakibara, speaking at a symposium in Tokyo, also said the U.S. economy is in danger of overheating, and that the Japanese economy will turn a corner within two weeks. The dollar's fall against the yen was further exaggerated by profit-taking, stop-loss selling and options-related trade as the dollar breached one support level after another, Mr. Wilson said. "The dollar really fell under its own weight," he added. A mass sell-off in Japanese government bonds Tuesday sent the 10-year yield as high as 2.31% -- its highest since July 1997 and nearly four times the low it hit in September. The sell-off came amid concerns that the Japanese government may flood the market with new issues, but the higher yields served to boost the yen by making yen-based investments more attractive. Additionally, there is speculation that the higher yields may increase dollar-negative capital flows ahead of the end of Japan's fiscal year March 31, traders said. The yen typically strengthens each spring, when Japanese institutions take profits back to Japan to beef up their bottom lines. "The trend is still up for the U.S. dollar, but [Tuesday's moves] show the dollar may have some rough sledding until the fiscal-year end," said Chris Widness, international economist at Chase Bank in New York. Traders largely expect the dollar to test still lower against the yen. According to Jeffrey Yu, chief dealer at Sanwa Bank in New York, the thinking in Japan may be, "foreign-exchange risks are getting greater, so if Japanese interest rates are only 3% lower than U.S. rates, why take the risks in forex?" The euro meanwhile remains pressured by speculation that euro-zone interest rates will fall in the near-term to boost the region's sagging economy, Mr. Yu said. "The pressure is still on to sell euros," he said. The European Central Bank is to meet Thursday. While ECB president Wim Duisenberg said Monday he sees no change in interest rates in the near-term, many analysts say they expect an easing sometime in the first quarter if not this week. Meanwhile, the U.S. Federal Reserve Open Market Committee began a two-day meeting Tuesday, and analysts widely expect no change in monetary policy given the continued optimism in the U.S. economy, tempered by worries about Brazil's crisis.