The return of recessionary fears in Japan depressed the yen on Thursday, February 8, as Tokyo stock prices slumped to a 28-month low, traders said. The government unveiled revisions to gross domestic product (GDP) which showed a contraction of 0.6 percent in the three months to September, rather than growth of 0.2 percent given in the preliminary estimate.
"Although the market is now shifting its attention to the October-December GDP results, the Japanese economy is worsening more and more," Mitsubishi Trust and Banking foreign exchange strategist Hideaki Inoue said. "There is little chance the yen will be bought aggressively against the dollar," he said.
After slumping to a low of 116.57 to the dollar, the yen was traded at 116.32-35 at 5:00 pm (0800 GMT), against 116.31 yen in New York and 115.23-26 yen in Tokyo late Wednesday. The euro was changing hands at 107.82 yen, against 108.01 in New York and 107.05 in Tokyo late Wednesday.
The GDP data prompted speculation the Bank of Japan may implement quantitative easing, an unorthodox monetary tool that could include flooding the markets with liquidity through the purchase of government bonds, when it convenes on Friday. "Foreign investors have been selling the yen aggressively on speculation the BoJ might announce a quantitative easing of monetary policy to stimulate the economy," Inoue said. "But there is a possibility they will buy back the yen for the dollar if the expectations are dashed."
The GDP revision depressed the Tokyo Stock Exchange's Nikkei-225 average to a 28-month closing low of 13,138.23, compounding the yen's misery. "The yen was sold as the Nikkei is getting closer to the 12,000 level, and investors expect the BoJ to take quantitative easing measures," Bank of Tokyo-Mitsubishi dealer Takeshi Iba said.
The euro meanwhile bought $0.9271-74 at 5:00 pm, down from $0.9282 in New York and $0.9290-93 in Tokyo Wednesday afternoon. —(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)
