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Dollar finishes one yen higher in Europe

LONDON: The dollar climbed more than one yen and reached its highest level against the Japanese currency in almost seven months as concerns about the bad debt-ridden Japanese financial system were fueled by fresh revelations.

Swamped by up to 100 billion yen of withdrawals today alone, the biggest of Japan's 400 credit unions, the Osaka-based Kizu Shinyo Kumiai, was forced to partially suspend business. Finance Minister Masayoshi Takemura, meantime, announced a scheme to liquidate 85-year-old regional bank, Hyogo Bank.

At 1520 GMT, the dollar was at 98.92/99 yen, up from 97.70/80 late Tuesday. Against the mark, it was 1.4766/71 compared with 1.4725/30 late on Tuesday.

"The fact the Japanese have come out in the open on the latest problems means they must have some confidence in dealing with it," said Hannah, IBJ's director of research.

The precedent set by the government bail-out of the Cosmo credit union earlier this summer means the necessity for private capital repatriation to offset the bad-loan crisis is lessened, said the IBJ economist. That removes a key potential prop from the yen, in place when similar crises loomed previously.

Although the mark outperformed the ailing yen today, testing a two-year high at 67.05 yen per mark, it also lost ground against the dollar following an expected 9-basis-point cut in the Bundesbank's securities repurchase rate to 4.30 percent.

The dollar caught a further boost later from an upward revision of second-quarter U.S. gross domestic product growth to 1.1 percent from the 0.5 percent originally estimated.

Still, the dollar met with firm profit-taking pressure whenever it popped its head above 99 yen and 1.48 marks during today's session.

Traders said a return of central bank intervention to offset any emerging frustration among dollar bulls is possible.

Tony Norfield, economist at ABN Amro, said now is an ideal time for the central banks to catapult the dollar through 100 as, technically, the picture then points to further sharp gains.

Traders said there were rumours the Bank of Japan was planning an imminent attempt at a final push through the key 100 level. Apart from the desire for a weaker yen, mounting domestic liquidity problems make a large injection of yen into the money markets via intervention almost essential, they said.

Hannah at IBJ said the U.S., Japan and Germany are clearly committed to avoiding financial meltdown in Japan. But, he said they may want to wait for dollar-positive, rather than yen-negative news before a fresh bout of intervention.-Reuter