22 June 2001, 11:31  Yen Climbs Versus Dollar as Japanese Exporters May Buy Currency

Tokyo, June 22 (Bloomberg) -- The yen rose, trimming yesterday's decline, after concern growth won't accelerate in Japan's economy for years pushed its currency to a two-month low, drawing Japanese exporters to buy their home currency. The yen strengthened to as high as 124.18 per dollar from 124.64 set in late New York trading yesterday. It recently traded at 124.33. The yen yesterday weakened to its lowest level against the dollar since April 17. It also rose to 106.13 per euro from 106.54 in New York.
``The dollar is being weighed down in Tokyo trading time as exporters are prompted to sell it,'' said Takayuki Togawa, a foreign exchange manager at Tokai Bank Ltd. Traders and investors are likely to buy the yen once it falls beyond 124.50 on expectations it will trade between 120 and 125 per dollar in coming weeks, said Mitsuru Sahara, a vice president for foreign exchange at Sanwa Bank Ltd. The yen last weakened beyond 125 on April 10.
Still, the yen is on a track for a third losing week on concern the Japanese government's plan to turn around the economy will worsen unemployment and initially stymie growth.
Japan yesterday forecast slow growth over the next few years as it caps spending and compels banks to write off bad loans. Economy and Fiscal Policy Minister Heizo Takenaka said as many as 200,000 people could lose their jobs as a result of the plan. He also said the economy, which contracted in the January-March quarter, will barely grow in coming years.
``The government's plans cannot help but bring pain such as corporate failures and a higher jobless rate, inevitably hurting the yen,'' said Tatsuro Karitani, a foreign exchange manager at Industrial Bank of Japan Ltd. ``The yen will decline toward 126 per dollar.''
Investors are like to monitor results of the Tokyo metropolitan government election this Sunday for signs of how much popular support Koizumi's Liberal Democratic Party has. The poll may is being seen as a referendum on the prime minister's call for voters to accept a couple of years of low economic growth as the price of reforms to restore the nation's economic health.
An show of support for the LDP ``would help Koizumi to implement his plans, which will come with economic pains, and that could push down the yen,'' said Yasuharu Tsuru, a foreign exchange manager at Mitsubishi Trust & Banking Corp. Election results are due Monday morning, Japan time.
U.S. Green Light
The yen may also decline on expectations the U.S. will condone yen weakness as long as it the result of efforts to restore growth by cutting back the government's role in the economy, traders said.
U.S. President George Bush, who will meet Koizumi later this month, is expected to convey U.S. support for Japan's move toward restructuring.
The euro, little changed, may fall after the European Central Bank left its benchmark interest rate unchanged, boosting concern the bank is moving too slowly to revive economic growth.
The 12-nation common currency yesterday weakened after the ECB kept its benchmark interest rates at 4.5 percent, suggesting policy makers are more concerned about a pickup in inflation than a slowdown in economic growth.
A report this week showed inflation among the 12 nations sharing the common currency accelerated in May at the fastest pace since the currency's introduction in January 1999.
``Now that higher inflation prevents the ECB from lowering rates even though there's mounting evidence of a slowdown, the euro is on a declining path,'' said IBJ's Karitani.
German Executives
Further hurting the euro, a report later today from the Ifo research institute will probably show executives in Germany, the region's No. 1 economy, are more pessimistic than at any time in the past two years, according to a Bloomberg News survey.
The euro most recently bought 85.36 U.S. cents, compared with 85.46 in New York.
In other trading, the dollar rose to 1.7797 Swiss francs from 1.7777 francs in late New York. The British pound was quoted at $1.4156, up from $1.4154 yesterday.

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