No Holiday for Yen As Barriers Broken
- By Lisa Jucca
- Sep. 16 1999 00:00
LONDON -- The yen continued its relentless advance against the dollar and the euro Wednesday, soaring to new highs in the absence of Bank of Japan intervention.
The yen hit 103.25 against the U.S. currency, its highest since January 1996, and an all-time peak of 106.84 against the single European currency.
Lack of action by the Japanese central bank during a Japanese market holiday encouraged yen bulls to push the dollar lower, and the slide was amplified by stop-loss orders as the yen burst one chart barrier after another and neared the psychological threshold of 100 yen per dollar. "We've been looking for dollar/yen to fall to 100 for a while. Today's slide is just a continuation of the recent move," said Steve Barrow, currency strategist at Bear Stearns in London.
"[Japanese Finance Minister] Kiichi Miyazawa said Tuesday there is no holiday for the Bank of Japan but the market clearly does not think that."
By midmorning, dollar/yen was at 103.69/79, compared with 105.25/30 late in Europe Tuesday.
The dollar had shed up to more than 2.5 percent on the day and nearly 8 yen since the release of Japan's surprise gross domestic product data on Sept. 9 that showed growth in the second quarter.
Euro/yen was at 107.59/69 compared with 109.64/68 in late European trading Tuesday. The euro has fallen more than 10 yen since Sept. 9.
Analysts said the yen needed a coordinated central bank intervention to reverse its bullish course, but so far both Japanese and U.S. authorities have denied the yen would be at the center of discussions of a Group of Seven leading industrial nations meeting on Sept. 25.
Along this line, Japanese Trade Minister Kaoru Yosano told a French newspaper, Les Echos, he did not expect "a concerted intervention by major central banks."
"I would not raise any hope that there would be any action to stem the yen rise at the G-7 [meeting] other than words," said Dick Howard, director of economic research at Julius Baer Investments in London.
Euro/dollar was at $1.0371/75 against a day's low of $1.0307, compared with $1.0417/24 late in Europe Tuesday.
The single European unit had failed to capitalize decisively on broad dollar weakness and remained sidelined for most of the European morning session as dealers awaited the release of key U.S. August consumer price index data.
Barrow said the fundamental macroeconomic scenario for the euro zone had not changed, and he expects the single currency to regain vigor in the medium-term.
"The euro does not deserve the fate that has befallen it since it got down from [its August peak] above $1.08," he said.
Analysts said U.S. consumer price inmdex figures would be crucial in determining prospects for a further hike in U.S. interest rates.
Economists polled by Reuters expect August U.S. consumer prices to rise on average an adjusted 0.3 percent.
Howard said a tame number could bring relief to the bruised U.S. asset markets and spur a brief dollar rally.