The dollar fell back against the yen in late trading here Monday, January 29, after rising on hopes that Federal Reserve policymakers will cut interest rates this week to support the faltering US economy.
The decision-making Federal Open Market Committee (FOMC), which convenes for a two-day meeting on Tuesday, is expected to cut rates by up to half a percentage point to ward off a hard economic landing.
The greenback peaked at 117.73 yen before slipping back to 116.88-90 yen at 5:00 pm (0800 GMT), compared with 117.26 yen in New York and 116.71-74 yen in Tokyo Friday afternoon. Japanese exporting companies took advantage of the dollar's rally to convert their overseas earnings back into yen, said Industrial Bank of Japan trading chief Keiichi Hayashi.
"Many are adopting a strategy of selling the dollar at levels close to the upper middle level of 117 yen and buying it back when the dollar falls to the low-116 yen, capping the dollar's rise against the yen," he said.
A rally on the Tokyo stock market "gave a boost to yen buying," said Sanwa Bank dealer Mitsuru Sahara. "There was no major market-moving factor in the evening but Japanese investment trusts and US brokerage houses sold the euro and the dollar against the yen," he said.
The euro stood at 108.15 yen at 5:00 pm, up from 107.92 in Tokyo late Friday. The dollar had earlier benefited as investors "expect the FOMC to implement an interest rate cut of 0.5 percent, or at least 0.25 percent, and a further rate cut later to prop up the US economy," said Sahara.
A rate cut would ordinarily lessen the appeal of dollar assets, but investors believe one is essential to prevent the US economy juddering to a halt after its record-breaking expansion of the past decade. Anything less than half a percentage point could spark a sell-off on Wall Street, hitting the dollar in turn, analysts say.
The yen derived no benefit from new preliminary figures showing Japan's industrial output rose 1.5 percent in December from the previous month. "The industrial output figures were within expectations," said Fuji Bank dealer Hideyuki Tsukamoto. "Even though the US economy is slowing down, investors believe an economic recovery in Japan is still far off," he said.
The euro bought $0.9248-50 at 5:00 pm after a listless day's trade, compared with $0.9241 in New York and $0.9245-48 in Tokyo Friday afternoon.—(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)
