Tokyo, May 12 (Bloomberg) -- The dollar fell to its weakest against the euro in more than four years after Treasury Secretary John Snow suggested the U.S. isn't concerned with the currency's 21 percent slide in the past 12 months. Snow yesterday told ABC television's ``This Week'' program the decline in the dollar ``helps exports, and I think exports are getting stronger as a result.'' The U.S. currency slid to $1.1574 per euro at 1:20 p.m. in Tokyo from $1.1487 late in New York May 9. It is at its weakest since January 1999, the month the euro began trading. The dollar also fell to 116.91 yen from 117.40 yen. ``The fact that Snow seemed to endorse the dollar's level, saying it was good for exports, is something we haven't heard before,'' said Paul McNee, chief currency trader at Australia and New Zealand Banking Group Ltd. ``This makes us think they are comfortable with the dollar's weakness.'' The currency may fall to $1.16 per euro ``soon,'' he said.
Snow's comments came after European Central Bank President Wim Duisenberg last week said there isn't ``cause for concern yet'' about the euro's rise against its U.S. counterpart. ``Neither the U.S. nor Europe is particularly worried about the dollar's weakness,'' said Shohgo Nagaya, manager of foreign exchange at Nomura Trust and Banking Co. That's ``accelerating the trend already in place.'' The U.S. currency may decline to $1.17 per euro this week, he said.
Bank of Japan
The dollar's decline against the yen may be limited by concern the Bank of Japan will sell its currency to stem a 9.8 percent rise in the past 12 months that hurts Japanese exports, which account for 11 percent of the economy. The BOJ sold 2.39 trillion yen ($20.6 billion) in the first three months of the year, helping to curb the dollar's decline. Zembei Mizoguchi, vice finance minister for international affairs, told reporters that Japan's ``policy of taking action in currency markets when needed remains unchanged. Looking at the economies of the U.S., Europe and Japan over the long term, the yen is in no condition to get stronger.'' The Bank of Japan, which acts in the currency markets at the behest of the finance ministry, sold the yen between Jan. 15 and March 10 when the currency was trading between 116.35 and 121.76 per dollar. The biggest one-day sale of yen in the period was on Feb. 27, with 361.5 billion yen. The yen has ``become suddenly volatile,'' Chief Cabinet Secretary Yasuo Fukuda said. ``The government will take firm steps if there are extreme moves.''
Yen Appreciation
Honda Motor Co.'s annual operating profit drops about 20 billion yen for every 1 yen the local currency appreciates against the dollar. A 1 yen movement against the euro increases or decreases the automaker's profit by about 4 billion yen, according to J.P. Morgan Securities. ``I'm expecting the strong yen trend to continue for a while, and that's going to continue to be a threat to exporters' earnings'' said Yasumasa Nishimura, who helps oversee the equivalent of $170 million in Japanese equities at Dai-Ichi Kangyo Asset Management Co. ``U.S. officials seem to want to keep a rather weak dollar policy at the moment.'' Snow said on ``Fox News Sunday'' that ``the dollar's value gets set in competitive exchange rates,'' adding that the U.S. will pursue a ``strong dollar'' by improving ``the fundamentals of the economy.'' U.S. exports fell by $8.6 billion at an annual rate in the first quarter, almost half their decline of the previous three months. The weaker currency is also helping to boost profit at companies including 3M and United Technologies by making their goods cheaper overseas and increasing the value of international sales when they are converted back into dollars.
Dollar Survey
The dollar may decline against the euro for a sixth week as higher interest rates on European debt lure capital out of the U.S. The dollar fell to $1.1536 per euro on May 9 as investors speculated the Federal Reserve would lower its interest-rate target from a 41-year low to bolster a slumping economy. About two-thirds of the 38 traders, analysts and investors surveyed by Bloomberg News on Friday recommended selling the dollar for the euro. ``Interest rates are very low, which is helping to divert capital to other places,'' said Lyle Gramley, a former Federal Reserve governor who now is a senior economic adviser at Schwab Capital Markets in Washington. ``That's putting pressure on the dollar.'' In other trading the yen fell to 135.29 per euro from 134.86. The dollar fell to 1.3063 Swiss francs from 1.3161 francs. The British pound rose to $1.6084 from $1.6053.//www.bloomberg.com