Tokyo, March 28 (Bloomberg) -- The yen fell after Finance Minister Masajuro Shiokawa signaled Japan may sell its currency to weaken it, bolstering earnings at exporters, which will close their books for the financial year on Monday. ``There still is speculation Japan will sell, even at the current level, which supports the dollar,'' said Minoru Shioiri, senior manager of the treasury and foreign exchange division at Mitsubishi Securities Co. The yen fell to 120.24 against the dollar at 1:57 p.m. in Tokyo, from 119.97 late in New York yesterday. It declined to 128.49 per euro from 128.19. The yen, which has strengthened more than 10 percent against the dollar in the past year, may fall to 120.70 today, Shioiri said.
Shiokawa said Japan ``will closely watch'' the yen, comments echoed by his deputy, Zembei Mizoguchi. A stronger yen erodes profits from exports, which account for about 11 percent of the nation's economy. The Bank of Japan sold 1.2 trillion yen ($10 billion) in January and February at the finance ministry's request. The dollar also rose versus the yen after the U.S. Central Command said an Air Force B-2 stealth bomber attacked a communications center in Baghdad, which it described as ``a major link in Iraq's national communication network'' early today. Baghdad was bombarded in attacks yesterday and into the night. Targets also included a military camp in the city's southern outskirts. Residents of the southern city of Basra are helping coalition forces arrest militiamen loyal to the regime, Agence France-Press quoted General Richard Myers, the chairman of the Joint Chiefs of Staff, as saying in an interview with the Qatar-based Al-Jazeera satellite network.
``News that is seen as helping the U.S. win the war is going to move the dollar up,'' said Takashi Nakata, head of foreign- exchange proprietary trading in Tokyo at BNP Paribas. The dollar may trade between 119.80 yen and 120.30 yen today, he said. Dollar's Losing Week The dollar was still headed for its fist weekly loss in three and worst week in six against the yen on concern a longer-than- expected war with Iraq will slow U.S. economic growth. The Washington Post, citing unidentified military officials, yesterday said the efforts to oust Iraqi President Saddam Hussein could take months and require more troops and hardware. ``Anything that signals the war is going to be more prolonged is bad for the dollar,'' said Su-Lin Ong, senior economist in Sydney at Royal Bank of Canada, the 13th-biggest trader in the $1.2-trillion-a-day currency market. The dollar may weaken to $1.10 per euro in the next few weeks, she said. U.S. Economy
The U.S. economy grew from October through December at about a third of the prior quarter's pace, hobbled by slower consumer spending, which has shown few signs of rebounding because of the Iraq war. Gross domestic product, the sum of all goods and services produced in the U.S., expanded at a 1.4 percent annual rate, matching the Commerce Department's estimate last month. Consumer spending was the weakest since the third quarter of 2001 when terrorists attacked New York and Washington. A government report today will probably say U.S. personal spending fell 0.1 percent in February for a second month, according to the median of 65 forecasts in a Bloomberg News survey. A report from the University of Michigan today will likely show its confidence index at an 11-year low, a survey of economists found.
The longer the Iraq conflict, the greater the chance oil prices will rise, eroding investor confidence and undermining global growth, the International Monetary Fund said. Oil, up as much as 15 percent this week, is headed for its biggest weekly gain since October 2000. ``With the U.S. and global economies in the doldrums, a swift resolution was what was needed'' to support the dollar, said Greg McKenna, Sydney-based market strategist at National Australia Bank.
Mizoguchi
The yen has risen 1.3 percent since reaching a three-month low of 121.88 yen a week ago. Mizoguchi, vice minister for international affairs, said ``Japan watches the foreign exchange market closely and will take steps as needed.'' The stronger yen threatens profits at exporters such as Canon Inc., which earns three-quarters of its revenue abroad, and sink the economy into a fourth recession in 10 years. The Iraq war and falling wages may also harm consumer spending, which drives half of Japan's economy. Spending by salaried workers fell a seasonally adjusted 1.1 percent in February from January, a government report showed.
Japan sold several hundred billion yen on March 7, after the dollar fell to a seven-month low of 116.35 yen, the Nihon Keizai newspaper said on March 9, citing no one. ``There's been a lot of talk about the BOJ selling yen, even at these levels, so it wouldn't be surprising,'' said Hidehiko Inamura, vice-president of foreign exchange at Citibank NA, the largest trader in the currency market. In other trading, the dollar was little changed at 1.3839 Swiss francs and at $1.0686 against the euro. The British pound was at $1.5661. //www.quote.bloomberg.com