Feb. 20 (Bloomberg) -- The dollar rose to the highest in a month against the yen after the Japanese government said it plans to add record sales of its own currency. The dollar also climbed versus the euro and the pound. Zembei Mizoguchi, vice minister for international affairs, said it ``won't be the case'' that Japan will tolerate a stronger yen following a report Wednesday that the economy grew at a 7 percent pace in the last quarter, the fastest in 13 years. ``The BOJ has been very successful,'' said Jake Moore, currency strategist in Tokyo at Barclays Capital Inc. ``People are getting tired of holding short dollar-yen positions.'' The yen fell to 107.77 per dollar at 8:25 a.m. in London, according to EBS prices, from 107.02 late yesterday in New York, and is down 2 percent this week. Japan's currency has failed to sustain gains above 105.50 per dollar 11 times this month.
In other trading, the dollar strengthened to $1.2642 versus the euro from $1.2716 and climbed to $1.8821 compared with the pound from $1.8823. The dollar also gained against the dollars of Australia and New Zealand. ``Short positions against the dollar have been built up fairly aggressively in the past few months and they are now being squeezed out of the market,'' Kamal Sharma, a currency strategist at Dresdner Kleinwort Wasserstein in London, said in an interview. The euro may ``edge toward $1.25,'' he said.
Threshold for Europe
The dollar has rallied against the euro after hitting a record low of $1.2930 per euro on Wednesday. The slide reversed after French President Jacques Chirac called for foreign exchange ``stability'' and German Economic and Labor Minister Wolfgang Clement said the euro's gains need to be ``bearable.'' Currency strategists said $1.30 is a threshold for European policy makers, and many traders pulled back on bets that the dollar would weaken beyond that in coming days. ``At this juncture, it appears that verbal intervention is working,'' Craig Ferguson, currency strategist in Melbourne at Australia and New Zealand Banking Group, said in an interview. Currency selling by the ECB ``is not a risk until the euro rises to $1.35.'' Against the dollar, the New Zealand and Australian dollars declined after a Dow Jones Newswires report cited New Zealand's Finance Minister Michael Cullen as suggesting the central bank may sell its currency to stem gains. The two are the best performing currencies against the dollar in the past 12 months. Japan sold its currency to stem a 10 percent gain versus the dollar in the past six months, adding to the 7.15 trillion yen ($66.6 billion) sold in the four weeks through Jan. 28, a monthly record. The central bank spent 20.4 trillion yen in 2003, the most in any year and five times the amount sold in 2002.
Lehman's Yen Call
Lehman Brothers Holdings Inc. said it is scaling back its bet on the yen because it is ``nowhere near as undervalued as most other Asian currencies.'' The fourth-largest securities firm by capital said it will further reduce its bet on the yen's advance, following last week's reduction. Japan is ready to take ``appropriate action'' against excessive moves in foreign exchange rates, while evaluating the effect of Japan's yen sales should be left up to investors and traders, Finance Minister Sadakazu Tanigaki in parliament. His ministry directs the Bank of Japan to buy or selling currency. Tanigaki earlier said the government and the Bank of Japan must work together to halt deflation, responding to speculation that Japan sells its currency to prevent gains from curbing exports and pushing down import prices. The yen fell to 136.67 per euro, from 136 yesterday, and was down 1.6 percent on the week. ///www.bloomberg.com