The yen slumped against the dollar in Tokyo Tuesday on a market rumor that a US ratings agency might downgrade Japanese government debt, dealers said.
At 2:00 p.m. (0500 GMT) the yen was quoted at 106.37-39 to the dollar, down sharply from 105.84 in Tokyo late Monday. US markets were closed Monday for Labor Day.
"The yen was sold following the market rumor that Moody's (Investors Service) might downgrade Japanese government bonds," said Kiyoshi Kuzuhara, a dealer at Bank of Tokyo-Mitsubishi.
Moody's in February threatened to downgrade Japan's yen-based government debt because of a ballooning fiscal deficit, caused by a decade of massive stimulus spending on the economy.
"The rumor itself is not surprising at all," said Hideyuki Tsukamoto, a dealer at Fuji Bank.
"We get a rumor like this from time to time. Although it is the factor behind yen-selling today, it is not going to trigger heavy selling," said Tsukamoto.
The Moody's spokesman in Tokyo could not be reached for comment.
The yen was also under pressure on comments by Japan's Economic Planning Agency director-general Taichi Sakaiya, Kuzuhara said.
Sakaiya told reporters the yen exchange rate was "comfortable" at between 100 and 110 to the dollar.
"Sakaiya's comments encouraged investors to sell off the yen," said Kuzuhara.
The euro traded at 0.8974 dollars around 2:00 p.m., against 0.9012 dollars in Tokyo late Monday.
"The euro was down due to technical inter-bank selling," said Fuji Bank's Tsukamoto.
Against the yen, the euro was quoted at 95.48 against 95.38 in Tokyo Monday. — (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
