The yen fell to a 30 month-low against the dollar in Tokyo Monday, April 2, as investors sold the currency due to the plunge in business confidence revealed in the Bank of Japan's Tankan survey, dealers said. The Japanese currency sank to 126.65 to the dollar earlier in the day before recovering to 126.10-14 at 2:00 pm (0500 GMT), down from 125.51 yen in New York and 125.25-28 yen in Tokyo late Friday.
"Investors sold the yen as the Tankan turned out to be very bad," said Mitsubishi Trust and Banking dealer Toshihiko Sakai. The Bank of Japan said Monday its latest Tankan survey showed business confidence had plunged in the past three months, with the large manufacturers' index falling to minus five from plus 10.
The last time the large manufacturers' index was in negative territory was a year ago. It was also the first time since December 1998 that business confidence has worsened from a previous quarter. Following the yen's slide, Finance Minister Kiichi Miyazawa said the government would closely monitor moves in the foreign exchange market. "The moves were too sharp since the weekend. We need to closely watch the movements," Miyazawa said. His comments, however, did little to support the yen.
"The yen remains under heavy pressure following the Tankan survey," said Kiyoshi Kuzuhara, dealer at Bank of Tokyo-Mitsubishi. "With the latest Tankan result, investors are becoming more pessimistic over the future of economic recovery," Kuzuhara said. The yen also came under selling pressure as Japanese investors bought more foreign-currency assets after the start of the new fiscal year on April 1, said HSBC currency analyst Tsutomu Shirafuji.
Dealers forecast the yen would weaken further. "The yen will fall to around 127-128 by the end of this week," Fuji Bank's dealer Hideyuki Tsukamoto said.
The European single unit meanwhile remained below 88 cents at $0.8773 around 2:00 pm, up from $0.8766 in New York, but down from $0.8806-09 in Tokyo late Friday. Against the yen, the euro bought 110.59, up from 110.02 in New York and 109.90 yen in Tokyo Friday afternoon. "Investors sold the euro as the European Central Bank did not lower its interest rates, disappointing prospects (of a cut) propping up the euro-zone economy," said Mitsubishi Trust and Banking's Sakai said. “Every economy is getting worse," HSBC's Shirafuji said.
"Investors choose which currency to buy based on whether a country has scope for easing monetary policy, providing fiscal policy assistance, and whether the government has the credibility in the market's eyes to excecute economic measures," Shirafuji said. —(AFP)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)