By Masataka Nakamura, BridgeNews Tokyo--March 1--The U.S. dollar and the euro lost ground against the yen in quiet trading Thursday. The selling from exporters and profit-takers weighed on the pair and the cross. The Japanese stock continued to fall after the Bank of Japan cut the discount rate and the unsecured call rate Wednesday by 0.1%. The losses of the stock market undermined the tone of the yen, but it did not lead to any major price action.
At the outset of the Tokyo session, U.S. names started buying the dollar/yen, pushing it up to a high of 117.58. However, the upward movement was countered by dollar/yen selling from profit takers and exporters above 117.50.
After the failure to test the top side, the pair moved downward, pressured by long liquidation pressures. Then, the dollar stabilized in a range of 117.28 to 117.40 for the rest of the Asian session. Ken Landon, chief currency strategist at Deutsche Bank said that the market is seasonally quiet at this time of the year, but the downside of the dollar/yen was well contained by dollar demand from Japanese investors.
The Nikkei 225 stock index accelerated its fall in the afternoon. The selling of the futures, coupled with selling of high technology oriented stocks, put downside pressures on the Nikkei. Weakness in the Nikkei psychologically supported the dollar/yen to some extent, but it failed to move the dollar/yen up much.
The Nikkei hit another new 15-year intra-day low of 12,528.50 before ending Thursday's session 12,681.66, down 201.88 points. Landon added that a fall in the Japanese stock market would cast a shadow over the yen's fundamentals, though it did not lead to a major price action for Thursday's session.
Meanwhile, the market did not show reaction to Bank of Japan Governor Masaru Hayami's comment that he is not considering adopting quantitative easing at present as few market participants expect the BOJ to take additional easing steps soon after the rate cut.
Dealers said that the overall activity was sluggish with fewer numbers of participants involved in the market.
For euro/yen, the cross moved up, led by the buying from Asian names and Japanese investment accounts. However, the upward momentum waned as the dollar/yen was well offered above the 117.50 area and the euro/dollar was well capped around the 0.9250 area.
In addition, Japanese exporters conducted moderate selling for the cross, putting downside pressures on the cross.
The day after the BOJ decided to ease its monetary policy, the ruling Liberal Democratic Party's Shizuka Kamei again put pressure on the central bank for further easing.
Kamei said the central bank should adopt quantitative easing policies and should expand outright JGB purchases.
Kamei also said he is concerned over the lack of stock markets' response to the BOJ rate cut and said the impact from the U.S. stock markets on the Japanese share prices is too large. Japanese Chief Cabinet Secretary Yasuo Fukuda said the slowing economic recovery in Japan was behind the BOJ's decision Wednesday to cut interest rates, adding that the U.S. economic slowdown also played a part in influencing the move.
He said structural reform and the passage of the budget are needed for self-sustained economic recovery, but the FSA shouldn't move too fast on the direct write-offs of non-performing loans.
Both Fukuda and Kamei denied speculation Thursday that Mori is considering resigning.
Commenting on the Mori's remarks Thursday morning in which he said he would make "a good decision as a politician," Fukuda said that is something politicians always think about and Mori didn't refer to resignation in this remark.
Kamei also said Mori is not in the situation of considering stepping down.
The leaders of Japan's four opposition parties--the Democratic Party of Japan, the Liberal Party, the Japanese Communist Party and the Social Democratic Party--are to meet Thursday to make a final decision on the timing of a no-confidence motion against the Cabinet of Prime Minister Yoshiro Mori, the Yomiuri Shimbun reported.
The four parties are considering submitting the motion on Friday. A top Chinese official cautioned the Bush administration Wednesday to avoid weapons sales to Taiwan, warning that an "explosive" situation could develop.
Zhou Mingei, a senior Taiwan expert, told news conference the United States has a much bigger stake in averting conflict between China and Taiwan than it did a decade ago.
U.S. weapon sales to Taiwan are an indication of the U.S. stance toward China and Taiwan. There is concern that the sales might increase tensions in the Far East, which could spur an increase in the yen political risk premium.
Euro/dollar stalled within 0.9225-0.9250, after an early attempt to break the overnight high was capped by euro/yen selling.
In the afternoon, euro/dollar eased to 0.9235 from the region's high of 0.9250 in Asian afternoon trade. A European bank out of Singapore was spotted selling among others, while a Japanese bank was sighted selling euro/yen, which weighed on euro/dollar.
Nasdaq 100 March futures lost 8.00 points. After the bell, the announcements by Gateway and 3Com seem to have soured sentiment. Gateway said it expects first quarter earnings per share to break even, versus analysts' estimate of a gain of 17 cents.
3Com warned that its third-quarter results would be substantially lower than expected. The company now expects a third-quarter pro forma operating loss in the region of U.S. $235-$245 million and revenues around $625-$640 million. End