Top Financial News --We talked in the morning about Yen weakening-- here is the latest...
<<The Bank of Japan flooded the banking system with more than
1 trillion yen today -- the last day of the monthly reserves
accumulation period, or RAP, -- leaving reserves about 1.3
trillion yen above the requirement.
''Leaving all the extra funds for the deadline shows the
BOJ wants quantitative easing'' of monetary policy, said Kenichi
Hayashi, a foreign exchange manager at Industrial Bank of Japan
Ltd. ''That means the dollar should strengthen against the
yen.'' >>
Mon, 15 Mar 1999, 5:51am EST
Dollar Falls to 1-Month Low as Rising Japanese Stocks Buoy Demand for Yen
Dollar Falls vs Yen as Climbing Japanese Stocks Buoy Yen Demand
London, March 15 (Bloomberg) -- The dollar fell against the
yen for a seventh day, sliding to a one-month low, as surging
stocks and rising bond yields in Japan boosted domestic and
overseas demand for yen to buy Japanese securities.
The dollar fell as low as 117.95 yen from 118.90 yen in
London late Friday. The euro was little changed at $1.0947 from
$1.0930, on expectations the European Central Bank won't change
interest rates when it meets Thursday.
Japan's benchmark Nikkei 225 stock average rose 1.88
percent to 15,779.60 points, its highest close since Aug. 7.
That boosted its 10-day gain to 11 percent, beating a 6.1
percent climb in the U.S. Dow Jones Industrial Average.
''The Nikkei's outperformed the other big indexes and
that's helped support the yen,'' said Lukas Daalder, a senior
markets economist at Rabobank International.
The yield on the benchmark Japanese government bond rose to
its highest in two weeks at 1.79 percent. As the yield rises,
Japanese investors could be tempted to bring home funds for
bigger returns, analysts said.
''Two supporting factors for the yen are rising Japanese
government bond yields and interest from foreigners getting
involved in the Nikkei,'' said Derek Halpenny, a currency
economist at Bank of Tokyo-Mitsubishi.
Year-End Demand
The yen could strengthen as Japanese investors repatriate
earnings in time for the end of the fiscal year on March 31.
Japanese officials, though, are likely to voice concern if the
yen rises enough to drive the economy deeper into recession by
making exports more expensive.
''Japanese officials want the rate as close as possible to
120 (yen per dollar) at fiscal year-end,'' said Halpenny, who
sees the dollar trading between 117 and 123 yen from now until
Mar. 31. ''Comments will get more blatant if the yen breaks
through that.''
Japanese Vice Finance Minister Koji Tanami said today
stability in the dollar-yen rate is crucial to the economy and
Japan will monitor movements in the currency markets.
He said areas such as domestic demand as well as the trade
surplus are affected by the exchange rate. ''We'll keep a close
watch on the foreign exchange rate,'' Tanami said at a regular
press conference.
Dow Concern
Traders were reluctant to buy dollars because of concern
the Dow average may extend losses for a second day and sap
demand for the dollar. The Dow fell 0.2 percent Friday, after
coming within 42 points of 10,000, the closest yet.
The dollar's decline was restrained, however, after Bank of
Japan Governor Masaru Hayami told legislators the central bank
is guiding key overnight call rate as low as possible.
Japan reported Friday the economy shrank at a 3.2 percent
annualized rate in the last three months of 1998 and contracted
2.8 percent in the year. Signs of a deepening recession could
prompt the Bank of Japan to lower other short-term rates such as
three-month certificates of deposit, while the central bank
decided Friday to keep its monetary policy unchanged, leaving
short-term interest rates near zero.
Lower rates help the economy by making borrowing costs
cheaper, while they hurt the yen by reducing returns on yen-
denominated assets.
''If the BOJ touches on short-term rates, the yen will be
sold to around 122.20 to the dollar,'' said Toyomitsu Sakata,
the head of treasury and foreign exchange sales at Commerzbank.
The central bank on Feb. 12 unexpectedly slashed its target
for the interbank overnight loan rate by 10 basis points to a
record 0.15 percent. Since then, the dollar rose 7 percent to a
three-month high of 123.75 yen on March 4, when the unsecured
overnight rate between banks -- equivalent to the federal funds
rate in the U.S., now at 4.75 percent -- hit a record-low 0.01
percent.
The Bank of Japan flooded the banking system with more than
1 trillion yen today -- the last day of the monthly reserves
accumulation period, or RAP, -- leaving reserves about 1.3
trillion yen above the requirement.
''Leaving all the extra funds for the deadline shows the
BOJ wants quantitative easing'' of monetary policy, said Kenichi
Hayashi, a foreign exchange manager at Industrial Bank of Japan
Ltd. ''That means the dollar should strengthen against the
yen.''
The U.S. currency showed little reaction to the news that
Japan's current account surplus -- the broad measure of income
flows and trade in goods and services -- rose 72 percent to
807.5 billion yen in January from a year earlier, while it rose
11 percent to 1.39 trillion yen from December.
In Europe, interest-rate futures contracts that settle in
June suggest traders and investors expect three-month money-
market rates to fall to 2.93 percent by then. That rate is down
from 3.06 percent on March 3, and compares with the current
three-month Euribor rate of 3.05 percent.
Oskar Lafontaine said ''bad teamwork'' was his reason for
stepping down as Germany's finance minister. His departure last
week fueled a short-lived rise for the euro up to a high of
$1.1061, though nagging concern about the fragility of economic
growth in the euro zone curbed its advance.
Lafontaine was part of a deadlock between politicians, who
were calling for lower interest rates, and the European Central
Bank, which ignored political pressure and froze the rate to
protect its credibility.
His resignation ''certainly rids the market of a factor
that was undermining the euro, that is the disagreement between
central bankers and Lafontaine,'' said Bank of Tokyo-
Mitsubishi's Halpenny.
The ECB won't cut rates as soon as this week's meeting,
according to analysts at Bear Stearns International, who don't
see a move before April 8. The benchmark interest rate has held
at 3.0 percent since the ECB took over monetary policy on Jan. 1
for the 11 countries that adopted the euro.
|
