Dollar Sinks, Hits New 3-Year Low Vs. Yen

27 January 2004 - 436 words
10:32 pm GMT

Associated Press Newswires
English

NEW YORK (AP) - The dollar sank across the board Tuesday, hitting new three-and-a- half-year depths against the yen, with the catalyst for the slide apparently a disappointing U.S. consumer confidence report.

The dollar was already under selling pressure against the yen after Japanese finance minister Sadakazu Tanigaki indicated that Japan might relax its defense of the dollar. The euro, meanwhile, was rising fast on the back of "an inordinate amount" of buying against the yen, said Josh Levy, president of currency trading Brokerage CMC Group in New York.

Although the Conference Board's sentiment index for January rose to 96.8 from 91.7, its highest level since the summer of 2002, it didn't meet market expectations. Dealers decided to book profits from the dollar's gains Monday and stop-loss sell orders were tripped against a wide range of currencies.

"This was a disappointing outcome relative to consensus expectations," wrote Ian Morris, chief economist at HSBC in New York. Economists surveyed by Dow Jones Newswires had anticipated a reading of 97.0. "It was a little worse than expected and people were (already) thrown by the less hardline stance of the Bank of Japan," said Lauren Germain, currency strategist at Bank of America in New York, referring to Tanigaki overnight in Tokyo. Tanigaki told Parliament that Japan will continue take action "against speculative moves in the market and to prevent exchange rates from moving rapidly," but that authorities aren't aiming at "guiding exchange rates to certain levels, or intentionally guiding the yen lower."

Dealers interpreted this as a sign Japan accepts its yen-selling intervention can only smooth out exchange rate volatility to slow the dollar's decline, not reverse it.

In late New York trading, the euro was quoted at $1.2633, up from $1.2467 late Monday. The dollar was quoted at 105.62 yen, down from 106.31 yen late Monday. The dollar was quoted at 1.2406 Swiss francs, down from 1.2570, and 1.3047 Canadian dollars, down from 1.3146. The British pound rose to $1.8258 from $1.8119.

Dealers are now turning their attention to the Federal Reserve's interest rate decision Wednesday. Most observers expect the Federal Open Market Committee will leave rates on hold at a 46-year low of 1 percent, with no hint any increases are likely in the near term. The meeting should also see the release of a policy statement much like the one released when the central bank last met in early December.

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