28 June 2001, 11:21  FOREX-Dollar hits 10-week high after Fed cut

By Isabel Reynolds
TOKYO, June 28 - The dollar climbed to a 10-week high on the yen on Thursday, helped along by a raft of factors, including the Federal Open Market Committee's (FOMC) rate cut.
The greenback touched a high around 124.84 in late Asia, its highest since April 16 and well up on New York closing levels around 124.34.
However, dealers said strong offers around 125.00 might keep the greenback from building on its gains for the time being.
The dollar had been buoyed from the open by the FOMC's decision, although the message accompanying the policy decision was seen as showing some nervousness about the future.
A further boost came as a report in the Wall Street Journal's Thursday online edition said the Bush administration wants both Europe and Japan to ease monetary policy more aggressively.
It quoted a senior administration official as saying the European Central Bank "needs to ease up quite a bit," while the Japanese authorities should combine expansion of the money supply with tough-minded economic reforms.
"In the short run, it's hard to see the dollar going anywhere but up," the official is quoted as saying.
The White House has refused to comment on the story so far, but analysts said such a policy would make sense for the United States, even though U.S. exporters have recently complained about the problems of a strong dollar.
"The export environment is not only about currency levels. You also need strong overseas economies, and that seems to be what they are aiming at," said Koji Fukaya, chief foreign exchange analyst at Bank of Tokyo-Mitsubishi.
The news comes just before prime minister Junichiro Koizumi's weekend summit with President George W. Bush, which some market players have speculated will be an opportunity for the U.S. authorities to offer their backing for a weaker yen.
Earlier events in the day had also done little to support the Japanese currency.
At its own Policy Board meeting, the BOJ decided unanimously to leave its monetary policy unchanged for the time being, a decision that was widely expected and offered only momentary support for the yen.
The country's May industrial output was down 1.2 percent month on month, far worse than a median forecast of a 0.4 percent decline in a survey of 18 economists.
"These are miserable figures. They were bad enough on their own, but the forward projections also show no sign of a rebound coming," said Marshall Gittler, head of Asian currencies at Bank of America.
The trade ministry forecast only a slight bounce of 0.3 percent in output for June and then a fall of 0.1 percent in July.
"They also presage a very bad tankan survey next week. All in all, there's no hope on the horizon for industry in Japan," he added.
A survey forecast that the headline diffusion index (DI) in the BOJ's "tankan" business survey, due out on Monday, will reveal that sentiment deteriorated to its worst level in 18 months.
The euro also strengthened against the yen and was bid around 107.30 in late Tokyo, compared with levels around 107.00 in late New York.
Against the dollar, the single currency was barely changed at $0.8599 , compared with 0.8603 in late New York.

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