The yen fell below 117 to the dollar in Tokyo Wednesday, January 10, for the first time since July 1999 over growing pessimism about Japan's economic recovery, a dealer said. The yen dropped to a low of 117.19 to the dollar in early morning trade as foreign investors dumped the currency due to Japan's weak economic recovery and sluggish stock prices.
"Foreign investors are becoming more pessimistic about the future of Japan's economic recovery," said Kiyoshi Kuzuhara, a dealer at Bank of Tokyo-Mitsubishi.
The yen returned to the 116 level as investors quickly took profits against the dollar, which stood at 116.12-15 yen at 3:00 pm (0600 GMT), against 116.83 yen in New York and 115.95-98 yen in Tokyo Tuesday afternoon.
But dealers said the yen's brief recovery was merely technical, adding the currency remains under pressure due to weak share prices and concern about economic recovery.
"After the dollar climbed to the 117 yen level, foreign investors sold the greenback on profit-taking, correcting their position," said Hideyuki Tsukamoto, a dealer at Fuji Bank.
"The move was purely technical. It did not change the yen-selling sentiment amongst investors," Tsukamoto said. Tokyo-Mitsubishi dealer Kuzuhara agreed. "The overall sentiment against the yen is weak," Kuzuhara said.
”The faltering Nikkei index and concern about economic recovery are the main reasons for the weak yen. These two factors are driving away investors, particularly foreign investors," he said.
The Tokyo Stock Exchange's Nikkei-225 index fell 177.86 points or 1.3 percent to finish the day at 13,432.65.
The euro meanwhile was quoted at $0.9433-36 at 3:00 pm, down slightly from $0.9438 in New York and $0.9467-70 in Tokyo Tuesday afternoon. "In contrast to the yen-dollar trading, the euro was moving in a limited range against the dollar due to a lack of fresh incentives," Kuzuhara said.
Against the yen, the euro was quoted at 109.53, compared with 110.28 in New York and 109.64 in Tokyo Tuesday afternoon. In Singapore, research house IDEAglobal forecast increased volatility in euro/dollar trading in coming months with the rate "hostage to the market's perceptions" of the US economic outlook.
"Expect this to be coupled with a buy-on-dips mentality that provides (the euro) with support and also biases it towards an eventual break of $0.9600," it said in a report.
"The extent of bearishness is evident in the futures market, where not only is the market pricing in 50 basis points easing at the next two (US Federal Open Market Committee) meetings, but also a significant probability of an inter-meeting move."—(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)
