960425

Dollar sharply up

against Yen mark

in late Tokyo trade

TOKYO: The dollar was sharply higher against the yen and the mark, with the mark also rising against the yen, in turbulent late Tokyo trade.

News in mid-afternoon of Japan's signing of a set of bilateral repurchase agreements for U.S. dollar-denominated government securities with Asian monetary authorities, called "repo pacts", first sent the dollar up on short-covering.

The ministry and the Bank of Japan announced that Japan had signed repurchase agreements with the monetary authorities of Australia, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore and Thailand. The agreements took effect on Thursday.

The pacts allow central banks to borrow U.S. government securities from each other, use them to bolster their foreign currency reserves and mobilise those reserves to protect their currencies if need demands.

Australia, Hong Kong, Indonesia, Malaysia and Thailand signed similar pacts in November 1995.

News of the agreement sent the dollar up on a wave of virtually simultaneous short-covering, with short-covering of marks also seen against the yen.

Although many dealers had predicted that sales from exporters and U.S. funds would ensue once the dollar rose near 107 yen, energy from the mark's sharp rise against the yen helped push it near to 107.15 yen before it fell back.

"It's hard to say how much impact this will really have. I'd say its main affects were felt today with the announcement itself, reinforcing as it does the sense of cooperation among monetary authorities," one trust bank dealer said.

There were unconfirmed rumours of a Bank of Japan intervention at around 106.60 yen and 106.80 yen. Dealers said the rumours emerged partly on a market sense that the would not want the dollar in danger of falling near 106 yen during the long Japanese holiday period which starts shortly.

They added that the announcement of the repo pact may have been made now in an attempt to push the dollar up as far as possible before then. "There is a sense that the would feel uncomfortable should the dollar fall below 106.50 yen ahead of the holidays," said Ichiro Ikeda, vice president at Goldman Sachs International Bank.

The dollar gained additional strength against the yen from speculative buying, which triggered stop-loss buying at 106.70 and 106.80 yen.

Singapore traders noted dollar buying interest in the wake of the repo pact announcement, saying the dollar needed to break decisively above 107.20 yen in order to climb further.

Unless the mark broke above 72.30/35 yen, it was likely to remain range-bound against the yen, a European dealer there said.

0643 GMT

2400 GMT

NYK CLOSE USD/JPY

107.09/16 106.52/55

106.50/60 USD/DEM

1.5248/58 1.5212/15

1.5198/05.-Reuter