31 January 2003, 09:46  Yen Heads for First Losing Week in 8; Shiokawa Ready to Sell

Tokyo, Jan. 31 (Bloomberg) -- The yen headed for its first losing week in eight against the dollar after Finance Minister Masajuro Shiokawa said Japan stands ready to sell its currency to protect an export-led recovery. ``We will continue to closely watch the currency market and take appropriate actions as needed,'' Shiokawa said in a speech to the parliament.'' Yesterday he repeated his view the yen should reflect ``purchasing power parity,'' or the rate at which one nation's price levels equal another's for similar products. Last month he said that level was between 150 and 160 to the dollar. The yen fell to 119.11 to the dollar at 3:35 p.m. in Tokyo, from 118.96 late yesterday in New York, a loss of 1 percent on the week. It fell as low as 119.27 after Japan's jobless rate rose in December to match a record high. The Japanese currency held at 128.74 against the euro, falling for a second week. ``It's clear the Ministry of Finance would like the yen to weaken,'' said Minori Takeuchi, currency strategist at J.P. Morgan Chase Bank. The yen may fall to 120 to the dollar in the first quarter of the year, she said.
The yen fell after Japan's unemployment rate rose to 5.5 percent from 5.3 percent in November, matching a high reached in October. The figure was higher than the median forecast of 5.4 percent by 31 economists polled by Bloomberg News, and suggests Japan may be on the brink of its fourth recession in a decade. ``Nobody looking at the Japanese economy can want to buy the yen,'' said Nobuaki Kubo, foreign exchange manager at Daiwa Bank Ltd. ``We knew the number would be bad, but this was worse than we expected.'' The yen may fall to 119.50 per dollar today, he said.
`Quite Happy'
The dollar pared gains against the yen after the U.S. Senate voted to confirm John Snow as U.S. Treasury secretary. Snow, who said in his confirmation hearing that ``a strong currency provides a reasonable medium of exchange,'' said in a letter to the Senate Finance Committee that he would not support official action to lift the dollar. The U.S. currency has fallen 3 percent against the yen and 9 percent against the euro in the past three months. ``Publicly, the U.S. is going to reaffirm its policy, but they aren't going to do anything to support the dollar,'' said Grant Fitzner, senior economist in Sydney at HSBC Holdings, the 12th-largest trader in the $1.2-trillion-a-day currency market. ``They're probably quite happy to see its depreciation against the euro and yen.'' The dollar may also fall on fears of a U.S.-lead war against Iraq that may keep global investors from putting their money into U.S. assets at a time when stocks are falling, analysts said.
Bush & Blair
Iraq has ``weeks not months'' to dismantle its biological, chemical and nuclear weapons programs, U.S. President George W. Bush said yesterday, adding that he would welcome Iraqi leader Saddam Hussein choosing exile. U.K. Prime Minister Tony Blair meets with Bush today and will press him to seek a new UN resolution authorizing military action against Iraq, the Financial Times reported. The dollar was finding some support as speculators canceled bets the currency would keep weakening, analysts said. Bets against the dollar last week were about twice the level at the end of September, according to data from the Commodity Futures Trading Commission. ``Speculative positions have been at the extreme and I don't expect the euro's rise to continue for now,'' HSBC Holdings' Fitzner said. HSBC, which had been predicting the dollar would fall against the euro for the past year, yesterday changed its outlook, and forecasts the dollar to rise to $1.0450 against its European counterpart in the next couple of weeks.
Japan cut its export growth forecast in December to 2 percent for the fiscal year that starts April 1, from a projected 5.4 percent this year. Exports, about 10 percent of the economy, expanded 0.6 percent in the third quarter, down from 5.9 percent the previous three months. The last time the Bank of Japan sold its currency at the behest of the Ministry of Finance was on June 28, when the dollar traded between 118.40 yen and 120.26 yen. In other trading, the dollar was at $1.0816 versus the euro, from $1.0823 late yesterday in New York. It was also at 1.3566 Swiss francs, from 1.3561 francs. The British pound was at $1.6538, from $1.6552. //www.quote.bloomberg.com

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