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Yen sell off currency lower value Original Source Link: (May no longer be active)
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Euro Surges; EU Ministers Signal They're Not Close to Selling
Jan. 20 (Bloomberg) -- The euro had its biggest advance against the dollar in two months after European finance ministers and central bankers signaled they aren't close to selling euros to stop the currency's appreciation.
The euro climbed two cents versus the dollar after Irish Finance Minister Charlie McCreevy, who chaired the group's monthly meeting late yesterday, said they had ``no view'' on how to stem the currency's gain. European Central Bank Chief Economist Otmar Issing said he's concerned about ``excessive movements'' in the exchange rate, repeating his comments from last week.
``It's a lot of rhetoric and they don't seem ready to take action now,'' said Grant Wilson, a trader at Mellon Financial Corp. in Pittsburgh, which manages $625 billion in assets. ``They started to raise the flags once the euro got to $1.29 and that tells the market that the level to look for is $1.30.''
Against the dollar, the euro surged to $1.2573 at 10:44 a.m. in New York from $1.2349 late yesterday, according to EBS prices. Versus the yen, the euro strengthened to 134.63 yen from 132.45, the biggest increase since September, after the Bank of Japan unexpectedly added cash to the economy. The yen traded at 107.23 per dollar from 107.25.
The BOJ decision, predicted by just one of 15 economists polled by Bloomberg News, is part of an effort to help slow the yen's gain against the dollar and the euro in the past year and protect exports, said Hans Guenter Redeker, head of currency strategy at BNP Paribas SA in London.
``The decision was based on the state of the economy and the condition of the stock and currency markets,'' Heizo Takenaka, minister for economic and fiscal policy told reporters in Tokyo.
Dollar Slide
In other trading, the dollar fell the most in seven months against the British pound and had its biggest drop versus the Swiss franc since December. Canada's dollar pared gains against its U.S. counterpart after the central bank cut its benchmark interest rate by a quarter point to 2.5 percent. Gold prices rose.
European Commission President Romano Prodi said the euro's rise is hurting exports. ``These effects, that are not only a euro increase against the dollar but against all world currencies from the current point of view, are maximizing the difficulties'' for exporters, Prodi told Bloomberg News late yesterday in a televised interview.
French Finance Minister Francis Mer told reporters today his main worry is ``volatility and the acceleration up and down'' in the currency. ``We want to have a stable rate,'' he said.
``Ministers effectively gave the green light for the euro to climb steadily, not rapidly, back to $1.30,'' said Steve Pearson, chief currency analyst in London at HBOS Treasury Services Plc.
German Confidence
The euro rose even as German investor confidence fell in January for the first time in three months. The index by the Mannheim-based ZEW economic institute slipped to 72.9, below the median estimate of 36 economists surveyed by Bloomberg News.
Germany's recovery from recession in the third quarter may be damped as the euro's 17 percent appreciation against the dollar in the past year crimps earnings of exporters including Volkswagen AG. Germany accounts for almost a third of the euro economy, which also recovered in the third quarter.
Irish Finance Minister McCreevy said ``there was no view'' on how the EU might stabilize currency markets after the dozen euro- region ministers called for ``stable'' exchange rates in a joint statement with the ECB.
``The euro's move is a reflection of their lack of conviction,'' said Mitul Kotecha, global head of currency strategy at Credit Agricole Indosuez in London. ``They could have made the prospect of some form of intervention more likely.''
The euro dollar rose 3.4 percent against the euro last week after European officials discussed the prospect of a rate cut or currency sales to weaken the euro. ECB council member Christian Noyer said selling euros is an option that's ``always available.'' Italian Deputy Finance Minister Mario Baldassarri said on Friday lower rates or sales would help protect exporters.
`Hold It Back'
The Bank of Japan's policy board decided by a majority to raise the upper limit of the reserves it makes available to commercial banks to 35 trillion yen ($326 billion) from 32 trillion yen, the central bank said in a statement.
Japan's interest rate is near zero. The ECB kept its benchmark rate at 2 percent this month, twice the level of the Federal Reserve's target rate. Traders and strategists said Japan's step may do little to pull down the Japanese currency.
``There's no doubt the yen is going to appreciate in the long run but they are trying to hold it back,'' said Redeker at BNP Paribas.
The yen last year gained 11 percent against the dollar, compared with a 20 percent advance for the euro, as Japan sold record amounts of its currency. Japan sold more than 6 trillion yen this month, more than a quarter of last year's total of 20.1 trillion yen, the Yomiuri newspaper yesterday reported.
Last Updated: January 20, 2004 10:46 EST
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