Dollar languishes in 14-year low vs yen in Asia

2009/11/27

TOKYO, Fri: The dollar languished at a 14-year low against the yen in Asian trade today as markets continued to price in expectations that the United States will maintain low interest rates for a prolonged period. The dollar briefly dipped to 84.82 yen in early Tokyo trade before rebounding to 86.15 yen, down from 86.53 in London Thursday. US markets were closed for the Thanksgiving holiday yesterday.

The euro fell to 1.4970 dollars from 1.4989 and to 128.95 yen from 129.70.

The dollar’s selling pressure is expected to increase due to “the market’s perception that the low interest rate policy in the United States is likely to last for a very long time,” noted Barclays analyst Masafumi Yamamoto.

The yen’s surge added pressure on Japanese authorities to intervene in markets, something they have not done since 2004, because the stronger yen hurts exports of Japanese companies.

Breaking from his recent cautious remarks on currency movements, Finance Minister Hirohisa Fujii acknowledged that the yen’s rapid rise was “harmful” to the economy.

“We will take appropriate action toward disorderly movements,” he told reporters today, adding that he will discuss foreign exchange with Europe and the US “when needed.”

When asked whether the Group of Seven nations may issue an emergency joint statement to take the steam out of the yen’s ascent, he responded: “That may be one of the options we could take depending on conditions.”

In October of last year the G7 issued a communique showing a shared concern over strong yen in an effort to soothe volatility amid a severe market meltdown.

Chief Cabinet Secretary Hirofumi Hirano said in a press conference that the government is mulling taking currency action to avoid a double-dip recession.

Tokyo is “studying which measures are more efficient ... including taking into consideration” the current foreign exchange rates. But he declined to comment whether the government had already intervened in money markets.

Market players were divided on whether Tokyo will intervene in markets to sell the yen to curb its rise.

“The Japanese authorities finally abandoned their benign neglect stance on the strong yen,” Barclay’s Yamamoto said, adding that the twin worries of weak Japanese shares and deflation are providing ammunition for an intervention.

But another Tokyo dealer told Dow Jones Newswires that “there’s no sense of urgency,” as an effective intervention — whether through a verbal statement or an actual monetary operation — would need cooperation with other countries.

The yen’s rise came as fresh Japan data out early today showed core consumer prices fell 2.2 per cent in October from a year earlier, marking the eighth straight month of decline. - AFP