U.S. Dollar Briefly Sinks to 33-Month Low
September 22, 2003
By KENJI HALL
Associated Press Writer
TOKYO -- The U.S. dollar slid to a 33-month low against the yen on Monday, rattling Tokyo investors who handed the stock market its worst setback in two years amid concerns that the currency fluctuations might undermine an export-driven recovery in Japan.
The dollar sank to a morning low of 111.37 yen, its lowest against the Japanese currency since December 2000. Market watchers said a weekend statement by finance leaders from the Group of Seven industrialized nations calling for "more flexibility" in exchange rates was the catalyst for the sell-off.
By late afternoon, the dollar was trading at 112.31 yen on the Tokyo foreign exchange market by late afternoon Monday, down 2.93 yen from 115.24 yen late Friday and also below the 114.27 yen it bought Friday in New York trading. It swung between 111.37 yen and 112.73 yen during Tokyo trading Monday.
The Nikkei Stock Average of 225 issues on the Tokyo Stock Exchange dropped 463.32 points, or 4.23 percent, to close at 10,475.10. It was the Nikkei's sharpest fall in points since Sept. 17, 2001 -- when it lost 504.48 points, or 5.04 percent -- and its lowest finish in three weeks.
On Friday, the blue-chip average declined 94.90 points, or 0.86 percent, to 10,938.42.
On the stock market, the Nikkei sank on concern that the yen's sudden strength could gut profits for automakers, electronics companies and other exporters. Sony, Toshiba, NEC, Toyota, Honda and Nissan topped a list of blue-chip exporters targeted for selling. The Nikkei's close was its lowest since Aug. 29, when it ended at 10,345.55.
A weak dollar-strong yen scenario is generally bad for Japanese exporters because the value of their revenues earned overseas falls when converted to yen.
Goldman Sachs equity analyst Kunihiko Shiohara said although Japanese automakers have hedged currency risk, an unfavorable one-yen fluctuation still erases millions of dollars from Japanese automakers' operating profits. For instance, Toyota would see its operating profit decline some 22 billion yen ($195 million), or about 1.7 percent, for every yen the dollar falls below the company's currency forecast for the year.
The broader Tokyo Stock Price Index fell 26.83 points, or 2.50 percent, to end at 1,043.20. The index, which includes more than 1,000 of Japan's largest companies, fell 5.70 points, or 0.52 percent on Friday.
Trading on the first, or main, section was extremely active, with 1.853 billion shares changing hands, up from 1.801 billion on Friday. Declining issues outnumbered advancers 913 to 526, and 82 ended unchanged from Friday.
In Dubai on Saturday, G7 finance ministers issued a communique urging "smooth and widespread adjustments in the international financial system" based on "market mechanisms."
The ministers didn't single out currencies, but traders interpreted it as pressure on Japan to stop intervening in the markets. Finance authorities in Tokyo, worried that a stronger yen could stifle a recovery for Japan's export-driven economy, have bought billions of dollars -- and sold yen -- in a series of interventions that have been criticized by its trading partners.
Traders said they suspected dollar-buying Monday by the Bank of Japan, on behalf of the Finance Ministry, helped the U.S. currency rally from its intraday lows.
Japan's new finance minister, Sadakazu Tanigaki, said he had "no intention" of changing the currency intervention policy.
In other currency trading, the euro was mixed against the dollar and yen. It traded at $1.1470 late Monday, up from $1.1273 Friday. Against the yen, the euro bought 128.82 yen, down from 129.97 yen.
The stock market's losses were beneficial for government bonds. The yield on Japan's benchmark 10-year bond fell to 1.2250 percent from 1.3900 percent late Friday. Its price rose 1.49 points to 103.33.
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Copyright (c) 2003, The Associated Press
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