New York, Feb. 25 (Bloomberg) -- The yen rose to its highest level in more than five months against the dollar after Japanese Finance Minister Masajuro Shiokawa indicated Japan and the U.S. are dividend on ways to weaken the currency. Shiokawa told Parliament the U.S. and Japan can't agree on a policy to stem a 14 percent gain versus the dollar in the past year. After sales of the yen failed to curb the rise, ``the U.S. and Japan together support letting the market decide the exchange rate,'' he said. The comments may mean the Japanese government is ``not going to be involved'' in trying to weaken their currency to the degree they have in the past, said Tim Stewart, head of currency strategy at Morgan Stanley, the seventh-largest trader in the $1.2 trillion- a-day foreign exchange market.
Japan's currency advanced to 117.33 against the dollar at 10:36 a.m. in New York from 117.84, and is at its strongest level since Sept. 4, when it traded at 116.94. The yen climbed to 126.32 versus the euro, from 127.27. Stewart said the yen may strengthen to between 115.5 and 116.5 per dollar in coming days. The dollar was little changed against the euro after an industry report showed the threat of war and rising energy costs sent U.S. consumer confidence to its lowest in more than nine years. The U.S. currency was at 1.0782 per euro, from 1.08. A stronger yen is threatening Japan's ability to avoid a fourth recession in a decade by eroding profits for exporters, such as Canon Inc., which earns three-quarters of revenue abroad, government officials said. Exports account for 11 percent of Japan's economy, according to government data.
Recent Sales
The Bank of Japan sold about 700 billion yen ($5.96 billion) last month at the behest of the Ministry of Finance in a bid to stem the currency's rise. Japan sold an estimated $33 billion of yen between May 22 and June 28, a record for one quarter. The yen rose about 3.8 percent against the dollar in that time. Any rise in the yen may be limited because Shiokawa also said ministry officials are ``closely watching drastic movements in the exchange rate and we're ready to take action on the currency if needed.'' ``Do we seriously think they're not going to'' sell yen ``at some point?'' said Sean Callow, a currency strategist at IDEAglobal. Callow said the yen at a 117 per dollar would raise the likelihood of another yen-selling by the Japanese government. The yen's recent gains -- it has strengthened eight of the past nine days against the dollar -- have been fueled in part by Japanese companies bringing money from abroad before the end of the country's fiscal year on March 31, analysts said.
German Confidence
The euro pared its decline against the yen after an increase in German business confidence in February, the second month of gains. The Ifo economic research institute's index rose to 88.9, the highest in seven months. The German government will probably say tomorrow the economy, Europe's largest, shrank 0.1 percent in three months ended December 31 from the previous quarter, a survey of 31 economists showed. European Central Bank President Wim Duisenberg said on Feb. 22 he no longer expects a recovery this year, signaling policy makers may cut interest rates. Demand for the dollar fell as the Conference Board's sentiment index plunged to 64, the lowest since October 1993, from 78.8 in January. Economists surveyed by Bloomberg News expected the index to fall to 77. ``This does pave the way for renewed dollar weakness,'' said Alex Beuzelin, a currency analyst at Ruesch International in Washington. ``It's a sign the U.S. economy is increasingly wobbly.'' Beuzelin said the dollar may weaken to $1.0935, its low from earlier this month, in coming days. Another industry report showed January home resales rose 3 percent to 6.09 million houses at an annual rate.
Some Strength
Demand for the rose earlier after U.K.'s Prime Minister Tony Blair told the parliament the U.S. and Britain will give Saddam Hussein ``one last chance'' to disarm and avert war. The dollar strengthened to as much as 1.0766 per euro in mid-morning trading. Britain has been the closest U.S. ally as President George W. Bush prepares for a possible attack on Iraq. The U.S. currency has fallen about 4 percent against the yen and 9 percent versus the euro since UN weapons inspections in Iraq began in November. Crude oil prices have risen more than 37 percent during the period on concern an Iraq war is approaching. //www.quote.bloomberg.com