The dollar spiked through 119 yen in Tokyo Monday, January 15, to leave the Japanese currency at its weakest level since July 1999 on mounting gloom over Japan's economy.
The dollar hit a high of 119.39 before retreating to 119.05-08 at 2:00 pm (0500 GMT), up from 118.39 yen in New York and 118.14-17 yen in Tokyo late Friday. The lower level was still the yen's weakest in 17 months.
The dollar could hit 120 yen soon, helped by relatively strong US retail sales data released last Friday, said Commerzbank Securities head of foreign exchange Ryohei Muramatsu.
Investors trusted US Federal Reserve chairman Alan Greenspan to engineer a soft landing in the economy, in contrast with their hostile view of Japanese policymakers led by Prime Minister Yoshiro Mori, Muramatsu said.
"The 120 yen level is what most people are expecting, even if it's just irrational exuberance," Muramatsu said, echoing a famous comment by Greenspan on Wall Street's runaway confidence in 1996.
"The market trusts Greenspan and no one trusts Mori. He (Mori) is a silly man," the Commerzbank trader said.
The yen clawed back some ground as Tokyo share prices continued to recover from a 27-month low reached last Thursday. The Nikkei-225 index gained 213.23 points, or 1.6 percent, to end Monday morning at 13,560.97.
"Investors such as US funds sold the yen because of their concerns over the outlook for Japan's economic recovery," said Sanwa Bank dealer Mitsuru Sahara. "But investors bought back the yen as the Nikkei rose more than 200 points," Sahara said.
Japanese exporters were also taking advantage of the currency's slump to exchange dollars earned overseas for yen. However, Mitsubishi Trust and Banking group manager Toshihiko Sakai said "there was no particular lead for the yen-buying, even if share prices rose slightly."
"Japanese companies will continue to offload cross-shareholdings towards March (when the financial year ends), which will be another structural factor prompting selling of the yen," Sakai said.
"Even if the Nikkei rises to 15,000, there is too much uncertainty surrounding the Japanese economy" for the yen to recover.
But HSBC currency analyst Tsutomu Shirafuji said: "I do not think the yen will fall further once it hits 120.
"Investors are uncertain about how the new US administration views the current weak yen/strong dollar situation," Shirafuji said.
The euro meanwhile bought $0.9482 around 2:00 pm, down from $0.9522 in New York and $0.9543-46 in Tokyo Friday afternoon. "Investors bought the dollar as the US retail sales data for December was not so bad as they had expected," Mitsubishi Trust and Banking's Sakai said.
US retail sales rose 0.1 percent in December from the previous month, the Commerce Department reported Friday. Sanwa Bank's Sahara said investors now thought the US economy "could recover faster than they had originally thought." "So the dollar has been bought back against the euro and others," he said.
Against the yen, the euro edged up to 112.95 from 112.75 in New York and 112.80 in Tokyo late Friday. —(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)
