TOKYO, Jan. 6 (Kyodo) — The U.S. dollar spiked against the yen in late Tuesday trading in Tokyo after hitting a new 40-month low here close to the 105 yen range while it plunged to a record lowagainst the euro.
Currency traders said they believe the late rebound versus the yen, which happened without dollar-positive news, was a product of yen-selling, dollar-buying intervention by the Bank of Japan.
At 5 p.m., the dollar was quoted at 106.35-37 yen, compared with 106.20-30 yen at 5 p.m. Monday in New York and 106.90-93 yen the same time in Tokyo.
It moved between a 40-month Tokyo low of 106.09 yen and a high of 106.41 yen Tuesday in Tokyo, changing hands most actively at 106.25 yen.
Meanwhile, the euro rose above $1.27 in Tokyo for the first time since its launch in January 1999. At 5 p.m., it stood at $1.2710-2712 and 135.17-21 yen, up from $1.2675-2685 and 134.60-70 yen at 5 p.m. Monday in New York.
The dollar’s sudden upturn against the yen came around 4 p.m. when it was on the edge of breaking below the 106 yen line.
Earlier in the day, the U.S. currency followed a mild downward path to hit a fresh 40-month low in Tokyo of 106.09 yen.
”Hedge funds, mostly those based in the United States and Europe, seem to have resumed selling off the dollar after taking a rest during the Christmas holidays,” said Satoshi Tate, vice president of the foreign exchange department at UFJ Bank.
”This year’s theme for the (currency) market will most likely be selling of the dollar,” he added.
The U.S. unit suffered a major setback in 2003, as it lost more than 10% against the yen and over 15% against the euro on selling that market players attributed to reasons ranging from concerns about huge U.S. current-account and budget deficits to growing terrorism risks to low U.S. interest rates.
The selling accelerated after September, when Group of Seven major nations issued a statement calling for ”more flexibility in exchange rates.”
It eased somewhat around Christmas after U.S. forces captured former Iraqi leader Saddam Hussein, but the dollar bears are now back in the market with the start of the new year, traders said.
”The overall trend of a weaker dollar seems to be unchanged,” said Junya Tanase, a forex strategist at J.P. Morgan Chase Bank.
The suspected Japanese intervention, which came as European trading got under way, prevented the dollar from dipping below the 106 yen line by the end of the day’s session in Tokyo.
But UFJ’s Tate said ”it is only a matter of time” before the dollar falls below 106 yen despite renewed resolve by Japanese officials to buy it up.
In the morning, Finance Minister Sadakazu Tanigaki said of the currency market, ”We will cope accordingly when there are speculative, sudden movements.”
