20000105

Dollar recovers above Y102 on BOJ intervention

TOKYO: Repeated rounds of intervention by the Bank of Japan (BOJ) pushed the dollar above 102 yen on Tuesday in Tokyo after the Japanese currency took its cue from gains in Tokyo stocks and began the New Year on a strong note.

The yen, supported by expectations of economic recovery in Japan this year, buoyant stock prices and exporter dollar sales, came within a whisker of a four-year high against the dollar on Tuesday before running into selling by the BOJ.

The dollar had sagged to 101.46 yen before the central bank began its support with its bids detected from around 101.70 yen. The dollar was resting at 102.24/34 yen after rising briefly to 102.73.

In late New York on Monday the dollar stood at 101.56 yen, down from 102.05 late here on Thursday ahead of the holidays.

Dealers said thin market volumes on Tokyo's first trading of the New Year exaggerated the impact of dollar buying by the BOJ, which intervenes on behalf of the Finance Ministry.

"The BOJ stepped in today as it had to absorb (dollar) selling orders for now," said a senior European bank dealer.

But despite the fact that trading got off with no technical Y2K bug-related glitches, many bankers and their customers have taken to the sidelines this week due to Y2K concerns.

The Finance Ministry was quick to confirm this morning's intervention, and Japan's top currency official Haruhiko Kuroda warned that authorities stood ready to act as necessary.

"We looked at the market's condition this morning and acted," Kuroda told reporters. "We will continue to watch the (foreign exchange) market carefully and will act decisively as necessary."

But despite those words, the dollar again faltered toward 102 yen in the afternoon, setting off further BOJ intervention, dealers said. Against the dollar, the euro EUR held on to most of its hefty overnight gains to stand at $1.0228/36, having leapt to $1.0262 in late U.S. trade.

Kuroda declined to comment on whether the BOJ intervened in the currency market in Tuesday afternoon.

It was the third time the BOJ has blocked the yen's rise to 101.00 to the dollar since last November when the yen hit a four-year high of 101.25.

But unlike the previous interventions at the end of November and on Christmas Eve, the Finance Ministry seemed hesitant to push up the dollar further above 103 yen this time, dealers said.

That was probably because it was waiting for market liquidity to increase later this month when wariness over Y2K problems will wane, some dealers said.

Some others say that the Japanese authorities found it more difficult to rein in the yen's rise now that the Japanese stock market rallied on hopes for a brighter economic outlook.

Tokyo's benchmark Nikkei 225 share index jumped 250 points at one stage on Tuesday morning to as high as 19,187, its highest level since August 1997.

A flood of foreign funds into the underweighted Japanese equity market was a major contributing factor to the yen's broad based appreciation last year.

"They seem to be aware it would difficult to push up the dollar only by themselves," said Mitsumaru Kumagai, senior market analyst at Industrial Bank of Japan.

Kumagai said given higher Japanese stock prices, the yen is naturally in an uptrend, while intervention could only provide a chance for foreign investors to buy stocks at bargain prices.

Also, there seemed fewer supporters for aggressive dollar-buying yen-selling intervention than before as a growing number of government officials have recently shown optimistic views over the economy, he said.

The euro, meanwhile, had been supported by a string of upbeat economic data from Europe, the latest being a strong Purchasing Management survey for December released on Monday. -Reuters