Dollar powers ahead as yen is forced down

Japanese aim to keep currency heading down
The dollar powered further ahead on the foreign exchanges yesterday touching 94 at one point in London trading. By the end of the day it had gained a further yen and pfennig against the Japanese and German currencies and strengthened by a cent against the pound, compared with the end of trading on Thursday.

Dealers were already starting to talk about the possibility of breaching the level of 100 yen against the dollar, last seen at the beginning of the year and equivalent to a 25 per cent rise on the dollar's all-time low in April.

In overnight trading in Tokyo, the dollar hit a high of 93.80. The Bank of Japan was reported to be intervening heavily while the Japanese trust banks also bought dollars in large amounts.

After falling back, the dollar then regained ground in London, trading to close at 93.73 against the yen and DM1.4341. The pound ended the day at $1.5775. In contrast to its experience earlier in the week, the pound made little further progress against the mark and the trade-weighted exchange rate weakened marginally

The Japanese authorities continued to do their utmost to keep the yen moving south. "The current weakness of the yen is good for Japan's economy," said Isamu Miyazaki, the newly appointed minister in charge of the Economic Planning Agency. The Trade Minister, Ryutaro Hashimoto, said that he wanted the dollar to gain still further.

He said that he would like the yen to fall to a level at which smaller companies would be profitable - estimated by Miti earlier this year at 110.

The EPA also announced that there would be steps to boost the economy before the second supplementary budget. Vice-minister Makoto Kobayashi said that the measures could include further public works programmes and a drive to push through deregulation.

Meanwhile, the markets were increasingly beginning to eye the possible objective of 100 to the dollar, which was last seen in early January. Neil MacKinnon, currency strategist with Citibank, said: "The feedback from investors is that there is still scope for further weakening of the yen with the view that the US and Japanese governments might have a common objective of about 100 yen."

However, there was little expectation that the dollar could recover much above that. "There would be too many squeals from corporate America," Mr MacKinnon said.

The latest economic figures from the US did little to discourage dollar bulls. The annual rate of consumer price inflation fell to 2.8 per cent in July from 3 per cent in June.

Retail sales fell back by 0.1 per cent in July, but this weakness was offset by upward revisions to June and May.

The dollar was helped against the mark by remarks by the Bundesbank's deputy chairman, Johann Wilhelm Gaddum, which suggested that there could be further easing of the repo rate next week.