950803

Dollar surges to

five-month high against

yen in New York

NEW YORK: The dollar surged to a five-month high on the yen after the Federal Reserve teamed up with the Bank of Japan in intervention to push it higher.

"This was a bold stroke," said Frank Pusateri, vice president at Mellon Bank. "The market is taking it seriously and I think it will have the desired effect."

The dollar reached a peak of 91 yen after the intervention, its highest level since March 14, when it was at 91.46 yen. It closed in the U.S. at 90.87/97 yen, up from the opening at 90.05/15 yen. It climbed to 1.3968/78 marks from 1.3895/05 marks at the open.

"It looks like we have entered a new trading range against the yen," said Hillel Waxman, vice president at Bank Leumi Trust Co. "Now that intervention has helped dollar/yen to breach the 90 yen level, 94 yen has become the new near-term target."

U.S. dealers reported the Fed made a series of purchases of dollars for yen that they estimated totaled around $500 million. Some dealers also cited indications that the Fed bought the U.S. currency for marks in discreet transactions.

Yet other market sources contended the central bank's action was exclusively focused on the dollar and the yen.

Treasury Secretary Robert Rubin, whose department authorizes Fed intervention, confirmed that the central bank was in the market though he did not specify which currencies the Fed was selling against the dollar.

The dollar-buying spree by U.S. and Japanese monetary authorities was the second time in a month officials of the two countries have joined forces to lift the dollar.

In Wednesday's intervention, similar to the last U.S.-Japan operation on July 7, the dollar purchases took place at a time when the dollar was already rising, which enhanced the effectiveness of the action.

In the case of Wednesday's currency market activity, the early catalyst to the dollar's rise was a surprise announcement by Japan's Ministry of Finance that it was taking steps to promote overseas investment by Japanese institutions.

In a statement in which he confirmed the intervention, the U.S. Treasury's Rubin applauded the move by the Japanese. "We welcome the action taken by the Japanese authorities to remove impediments to capital movements. These actions and our joint operations are consistent with the April 25 G7 communique," Rubin said, referring to an April Group of Seven statement calling for an orderly reversal in the dollar's slide.

"The timing of the intervention and the comments were excellent," said Mary Beth Slack, currency analyst at consulting firm MCM CurrencyWatch, who said the Fed's dollar buying was likely a "reward" for Japan's regulatory changes.

"The two sides seem to be showing some degree of cooperation and that looks very good for the dollar right now," she added.

Traders said that while the estimated sum of $500 million for the intervention on dollar/yen was rather modest compared to some other interventions, they added that the Fed's method of intervening repeatedly was rather aggressive.

"They weren't waiting for the dollar to slip off its highs when they came in again," said Gabriele Schmitt, vice president at Bank of New York. "They just kept hammering it."

At the close, the dollar was at 1.1570/80 Swiss francs versus the opening at 1.1501/06 Swiss. It was at Canadian $1.3570/75 from C$1.3621/26. Sterling eased to $1.6010/20 from $1.6025/32. The Australian dollar closed at $0.7414/20.

At midday, the Morgan Guaranty trade-weighted index stood at 90.9 percent of its 1990 trade-weighted value.-Reuter