Tokyo, April 1 (Bloomberg) -- The yen fell for the first day in three after Japanese Finance Minister Masajuro Shiokawa said his nation is prepared to sell its currency to stem ``speculative'' movements. Demand for the yen also waned after the Bank of Japan's Tankan report showed most businesses are pessimistic about the economy for a ninth quarter and plan to cut investment. The release fed concern among investors that nation's recovery from its third recession in a decade is stalling.
Japan's currency weakened to 118.39 against the dollar at 2:43 p.m. in Tokyo from 118.09 late yesterday in New York, when it had its biggest gain since Dec. 13. It was also at 129.06 per euro, versus 128.87. The yen's four-month, 5 percent advance against its U.S. counterpart hampers Japan's export-led recovery. Yesterday's rise in the yen brought it to a level that the Ministry of Finance ``would usually worry about and at a speed that surely must ring alarm bells,'' said Marshall Gittler, currency strategist in Tokyo with Deutsche Bank AG, the third- largest trader in the $1.2-trillion-a-day currency market. ``The MOF will still be in the market'' selling the yen, which may weaken to 122.10 against the dollar in coming weeks, he said.
Japan's currency has been ``volatile'' since yesterday, and ``speculative moves are unwelcome,'' Shiokawa said. The Bank of Japan, which acts in currency markets at the behest of the Ministry of Finance, sold about 1.2 trillion yen ($10.2 billon) in March, a ministry official said yesterday. That amount matched the combined yen sales in January and February.
Iraq
Any gain in the dollar against the yen may be limited by concern the war in Iraq will drag on an already-slowing U.S. economy. Coalition ground forces are battling Iraq's best-equipped troops about 50 miles (80 kilometers) south of Baghdad. Warplanes bombed Iraqi positions throughout the country, military officials said. President George W. Bush told members of the U.S. Coast Guard that ``many dangers lie ahead'' for U.S. and British troops as they move closer to Baghdad. An industry report yesterday showed Chicago-area manufacturing contracted in March for the first time in five months. Economic reports this week may show U.S. manufacturing dropped and the jobless rate rose as the war hurt consumer and business confidence, analysts said. The Standard & Poor's 500 Index fell 1.8 percent, after posting its biggest weekly loss since January last week, reducing demand for the U.S. currency. As long as ``the length of this conflict is going to be prolonged, it's negative for the dollar,'' said Thomas O'Malley, who oversees currency strategy in San Francisco for Barclays Global Investors, which manages about $700 billion. The U.S. currency may weaken to $1.11 per euro in coming weeks, he said.
U.S. Economy
The U.S. economy is in good shape and should improve once the war ends, said J. Alfred Broaddus, president of the Federal Reserve Bank of Richmond and a voting member of the Fed's policy committee. ``I think the recovery is solid enough to withstand the shocks it is currently experiencing and to accelerate moderately as the year progresses,'' Broaddus told students and faculty at Johns Hopkins University. ``If the war were to last significantly longer and be more difficult than expected, and there were a sustained sharp increase in oil prices, obviously the recovery could be undermined.'' Crude oil for May delivery rose as much as 28 cents, or 0.9 percent, to $31.32 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
Tankan
Confidence at large manufacturers fell 2 points to minus 10 in March, the Tankan survey showed, worse than the minus 8 reading a median of 40 economists surveyed by Bloomberg News had forecast. ``You certainly can't buy the yen on the back of the Tankan data,'' said Takashi Nakata, head of foreign exchange proprietary trading at BNP Paribas in Tokyo. The yen may weaken to 118.50 against the dollar today, he said. In other trading, the dollar was at $1.0903 per euro, from $1.0915. The U.S. currency was at 1.3535 Swiss francs from 1.3514 francs. The British pound was at $1.5810, from $1.5827. //www.quote.bloomberg.com