The yen slumped through 120 against the dollar in Tokyo Monday, March 12, with investors shrugging off a rise in Japan's gross domestic product (GDP) to focus on a plunge in the Nikkei stock index. The yen was quoted at 120.45-48 to the dollar at 2:00 pm (0500 GMT), down sharply from 119.53 in New York and 119.75-78 in Tokyo late Friday.
"The GDP figures were in line with the expectations of investors. There was no surprise in the data," said Mitsuru Sahara, vice president of foreign exchange at Sanwa Bank. Japan's GDP rose 0.8 percent in the three months to December from the previous quarter, the government said, meaning the world's second-biggest economy escaped recession after growth in the previous quarter was negative. "The rise in GDP hardly supported the yen as foreign investors sold the currency due to a plunge in the Nikkei," Sahara said.
"The heavy fall in the Japanese stock market spooked investors, particularly foreign investors, dragging down the yen against the dollar and euro," he said. The Tokyo Stock Exchange's Nikkei-225 index lost 378.45 points, or 3.0 percent, to close the morning session at 12,249.45, in reaction to a slump by New York's Nasdaq market on Friday.
The yen was quoted at 112.32 to the euro around 2:00 pm, down from 111.47 in New York and 111.48 in Tokyo late Friday. The yen was still suffering from dismal comments about the economy last week from Finance Minister Kiichi Miyazawa, who said Japan was "in critical recession" and that the national finances were on the brink of collapse. "The renewed bearish movement from last week was made due to the comments from Japanese authorities," HSBC foreign exchange strategist Tsutomu Shirafuji said.
"Miyazawa said he has no room to stimulate the economy. There is no room with fiscal or monetary policy, so the market understood that to mean the only option is a weaker-yen policy. "We will toss the hot potato to our competitors abroad," Shirafuji interpreted the finance minister as saying. "The market will now check the attitude of international authorities, such as the US Treasury."
The euro meanwhile bought $0.9329, little changed from $0.9323 in New York and $0.9320-23 in Tokyo Friday afternoon. "Investors are finding few fresh incentives in dollar-euro trading in Tokyo," Sanwa's Sahara said. Singapore-based DBS Bank said the euro was likely to remain capped in the $0.92-0.94 range throughout the week. "There is a lack of incentives to break through $0.94 unless the US releases enough bad news this week to suggest persistent weakening in its economy," the bank said in a report. —(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)