The yen soared against the dollar in Tokyo Wednesday on comments by a Japanese lawmaker that the Bank of Japan might raise interest rates again by the end of this year, traders said.
The yen was quoted at 107.44-47 to the dollar at 2:00 p.m. (0500 GMT), up sharply from 108.30 in New York and 108.43 in Tokyo late Tuesday.
"The yen jumped back to the 107 level immediately after the comments by Liberal Democratic Party lawmaker Ichizo Ohara," said Shigeru Nakane, a dealer at Asahi Bank.
Ohara, an influential lawmaker known for his economic expertise, said the Bank of Japan might raise its overnight call interest rate to 0.35 percent by the end of December, according to the Nikkei Net news service.
On August 11, the central bank ended its 18-month-old "zero rate" monetary policy to guide the call rate — at which commercial banks lend to each other — to around 0.25 percent.
"Ohara's comments encouraged investors to buy up the yen," Nakane said.
Investors ignored the Federal Reserve's decision Tuesday to keep US interest rates stable.
"The Fed's decision yesterday to keep interest rates unchanged was well in line with expectations and it had no direct impact on the market here," said Bank of Tokyo-Mitsubishi dealer Kazuma Inoue.
"As investors were looking for a fresh lead, they jumped on the LDP official's comments to buy the yen."
The euro meanwhile remained depressed against major currencies after a key survey of German business confidence slumped to its lowest point since last November.
The euro stood at $0.8942 around 2:00 p.m., against $0.8972 in New York and $0.8986 in Tokyo late Tuesday.
Against the yen, the euro was quoted at 96.10, compared with 97.11 in New York and 97.43 in Tokyo Tuesday.
The euro slumped through $0.90 late here Tuesday after the release of the Ifo survey, which showed the business climate index for western Germany fell to 99.1 in July, from 100.4 in June.
"The Ifo figure confirmed investors' fears that the economy in Europe is retreating," Nakane said. "It shattered investors' expectations for economic growth in Europe."
The weak German data militated against any rate hike by the European Central Bank, said research house IDEAglobal.com in Singapore.
"This is against the appearance that the Fed is successfully guiding the US economy towards minimal inflation with robust growth," it said. — (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
