| Japan intervenes in dollar by weaken japanese currency Original Source Link: (May no longer be active) http://www.miami.com/mld/miamiherald/business/national/8130592.htmhttp://www.miami.com/mld/miamiherald/business/national/8130592.htm
Posted on Sun, Mar. 07, 2004 Dollar Expected to Rise on Likely Bank of Japan Interventions
By Mutsuo Fukushima, Kyodo News International, Tokyo Knight Ridder/Tribune Business News
Mar. 6--TOKYO - The U.S. dollar is expected to rise against the yen next week as the Bank of Japan (BOJ) is likely to keep up its massive interventions in the market to weaken the Japanese currency.
Currency traders said they expect the dollar to trade between 110.00 yen and 113.00 yen in the coming week.
During the past week, the dollar generally moved higher due to a string of BOJ dollar-buying interventions and speculators' moves to reverse their short-dollar and long-yen positions, the traders said.
The dollar touched the week's low in Tokyo of 108.93 yen on Tuesday and hit a five-month high of 111.43 yen on Friday, the highest level since Oct. 1, 2003, when the dollar rose to 111.50 yen in Tokyo.
Many traders said the BOJ has been intervening frequently over the past two weeks to weaken the yen, a move which helps Japanese exporters.
Daisuke Uno, chief market analyst at Sumitomo Mitsui Banking Corp., said that even good Japanese gross domestic product (GDP) data released in mid-February could do little to boost the yen.
"Feb. 18, when the recent trend of the dollar's sharp rebound began, was the very day when Japan reported its GDP grew a real 7 percent on an annualized basis," Uno said.
"The strong GDP data could not push the yen higher because the BOJ is said to have placed dollar bids at every 0.01 yen," he added.
Finance Ministry figures show monetary authorities spent 10.49 trillion yen in the first two months of 2004 on interventions -- more than half the record 20.06 trillion yen they used in all of 2003.
The BOJ now has more ammunition. An extra budget for the current fiscal year adopted in early February added 21 trillion yen to the BOJ's intervention funds, bringing them to a total of 100 trillion yen. The fiscal 2004 state budget, to be enacted by early April, will add another 40 trillion yen.
The BOJ's interventions are also causing various players, especially U.S. hedge funds, to start adjusting their short-dollar and long-yen positions.
"The reason hedge funds started short-covering is the specter of BOJ interventions," Ryohei Muramatsu, senior currency trader at Commerzbank, said.
The BOJ has a lot more cash at hand than all the hedge funds combined, so they really have no alternative, he said.
Koki Muroi, deputy manager of the forex trading group at Aozora Bank, noted market players are also becoming more dollar-bullish, saying, "Players are now in the mood to capitalize on this dollar-rebound trend." On Friday, the U.S. Labor Department said the economy added just 21,000 nonfarm jobs in February, far below market expectations of 125,000.
This pushed the dollar down against most other major currencies, but not against the yen.
Suspected BOJ interventions helped the dollar climb into the 112 yen level for the first time in five months. After hitting 112.30 yen, it was quoted at 112.00-10 yen at 5 p.m. Friday in New York, up from 111.15-18 yen late Friday in Tokyo.
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To see more of Kyodo News International, go to http://www.kyodonews.com
© 2004, Kyodo News International, Tokyo. Distributed by Knight Ridder/Tribune Business News.
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