Sun, 18 Apr 1999, 8:50pm EDT
Dollar Steady Near 3-Week Low vs Yen Amid Concern Japan May Buy Dollars
Dollar Steady Near 3-Week Low vs Yen Amid Intervention Concern
Tokyo, April 19 (Bloomberg) -- The dollar was little changed against the yen, after falling to a three-week low Friday, amid speculation the Japanese government may try to stem the yen's rise by asking the Bank of Japan to buy dollars.
A stronger yen endangers the prospects for economic recovery by making Japanese exports less competitive abroad. The yen has gained more than 2 percent since the beginning of this month.
``It's hard to sell dollars for yen because of concerns that Japanese officials will talk down the yen and possibly intervene,'' said Hiroshi Sakuma, a foreign exchange manager at
Barclays Bank Plc. ``Yet, if the euro falls against the yen, that could help drag down the dollar.'' He expects the dollar could fall below 117 yen and won't rise above 118.15 yen today.
The dollar was quoted at 117.65 yen, down from 117.84 yen in late New York trading Friday. The euro was quoted at 125.80 yen, down from 126.17 yen in New York. It was quoted at $1.0684, down from $1.0705 in New York.
The yen gained Friday as low as 118.45 to the dollar, its highest since March 24, as Japanese Finance Minister Kiichi Miyazawa suggested that the government may give tax breaks for investments and assets. Any hint that Japan will work harder to help revive the economy is plus for the yen, traders said.
Meanwhile, Vice Finance Minister for International Affairs Eisuke Sakakibara and his deputy, Haruhiko Kuroda, have said almost daily that a strong yen is undesirable. Sakakibara said on April 9, when the dollar was still at around 121 yen, that Japan will take ``decisive action to stem any premature rise in the yen.''
For example, Honda Motor Co., Japan's third-largest automaker, loses 6 billion yen ($50 million) in operating profits when the dollar falls by 1 yen.
Euro
The euro was little changed against the dollar and is poised to extend its losses, after falling Friday to its lowest level since its introduction at the start of this year, on speculation that fighting in Yugoslavia will drag on, further burdening Europe's already sluggish economies.
The euro, which surged only on the first trading day of Jan. 4, has steadily declined since then, touching its lowest of 1.0633 Friday.
Many investors and traders are still worried that the region's economy may slow even after the European Central Bank cut its benchmark interest rats 50 basis points earlier this month to 2.5 percent. Budgets may have to stretch even further to pay for the military operations against Yugoslavia and for aid to refugees, they say.
The euro also suffered against the yen because of the shift from European financial assets to Asian markets, traders said.
International investors have begun to shift money from Europe to Japan and other Asian countries -- where stock markets are rallying on optimism the region is beginning to recover.
Japan's benchmark Nikkei 225 stock index has risen about 21 percent since the start of this year, helped in part by foreigners' purchases, while Germany's benchmark DAX Index has climbed 3 percent. Stocks in Hong Kong, Indonesia, Malaysia, Singapore and Thailand all rose more than 3 percent Friday.
``We have investors dumping Europe in favor of Asia,'' said Eric Nickerson, a currency strategist at BankAmerica Corp, who predicts the euro will fall to $1.0550 this week. ``I don't see anything supportive of euro on the horizon.''
In other trading, the Swiss franc was quoted at 1.4983 to the dollar, up from 1.4963 to the dollar in late New York trading Friday. The British pound was quoted at $1.6125, down from $1.6140 in New York.
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