Dollar set for recovery despite sharp fall against yen

DIANE COYLE

Economics Correspondent

The dollar suffered a sharp setback yesterday in its recovery against the yen after it failed to breach the 100 barrier in the wake of the failure of a Japanese bank and credit union on Wednesday. But the feeble state of the Japanese economy was confirmed by new statistics, suggesting the dollar's reversal against the yen will be temporary.

Another cut in Japan's official discount rate is considered likely after the Ministry of Trade and Industry said yesterday its survey of manufacturers suggested industrial output will fall 1.9 per cent in the July-September quarter. This prospect will help keep the yen weak.

Output fell 2.4 per cent in July, its fourth successive monthly decline. MITI expects a 4 per cent rise in August but a 4.3 per cent fall in September. If this occurs, it will be the biggest drop in production in more than seven years.

Additional gloom was furnished by a fall of 11.2 per cent in housing starts in the year to July. This was the fifth successive month of decline.

Economists believe the Japanese authorities are now determined to hold the yen down and stimulate the moribund economy. "The recent weakness of the currency, along with the rebound in the stockmarket, has pulled Japan back from the brink of a recession that would have caused a financial meltdown," said Gerard Lyons, chief economist at DKB International. He said any sign of a sustained recovery in the yen would trigger a cut in the discount rate from its current record low of 1 per cent.

Statistics on the US economy painted a mixed picture yesterday. New orders for manufactured goods fell 1.3 per cent in July - far more than expected - with the weakness spread over a wide range of industries. The Chicago purchasing managers' index, one of the most important regional indicators, fell to 49.3 last month from 49.7 in July. A level below 50 is taken to point to a slowdown.

But there were fewer than anticipated new unemployment claims last week, with the total steady at 349,000, and personal incomes grew by a faster than expected 0.7 per cent in July.

Today's job figures for August will be decisive. "A strong report will definitely unwind expectations of further cuts by the Fed, and crystallise sentiment on the dollar," said Adrian Cunningham, an analyst at UBS.

PROMOTED VIDEO
Sport
Dwight Gayle (left) celebrates making it 1-1 with Crystal Palace captain Mile Jedinak
premier leagueReds falter to humbling defeat
Sport
Harry Kane
premier leagueLive minute-by-minute coverage
News
video
Arts and Entertainment
Jerry Hall (Hand out press photograph provided by jackstanley@theambassadors.com)
theatre
News
peopleFormer civil rights activist who was jailed for smoking crack cocaine has died aged 78
Arts and Entertainment
tv
News
ebooksNow available in paperback
Arts and Entertainment
Damien Hirst
artCoalition's anti-culture policy and cuts in local authority spending to blame, says academic
News
i100
Arts and Entertainment
Kirk Cameron is begging his Facebook fans to give him positive reviews
film
Arts and Entertainment
Jason goes on a special mission for the queen
tvReview: Everyone loves a CGI Cyclops and the BBC's Saturday night charmer is getting epic
Sport
Jonny May scores for England
rugby unionEngland 28 Samoa 9: Wing scores twice to help England record their first win in six
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

Reach Volunteering: Charity Treasurer

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible
Look what's mushrooming now! Meat-free recipes and food scandals help one growing sector

Look what's mushrooming now!

Meat-free recipes and food scandals help one growing sector
Neil Findlay is more a pink shrimp than a red firebrand

More a pink shrimp than a red firebrand

The vilification of the potential Scottish Labour leader Neil Findlay shows how one-note politics is today, says DJ Taylor
Bill Granger recipes: Tenderstem broccoli omelette; Fried eggs with Mexican-style tomato and chilli sauce; Pan-fried cavolo nero with soft-boiled egg

Oeuf quake

Bill Granger's cracking egg recipes
Terry Venables: Wayne Rooney is roaring again and the world knows that England are back

Terry Venables column

Wayne Rooney is roaring again and the world knows that England are back
Michael Calvin: Abject leadership is allowing football’s age-old sores to fester

Abject leadership is allowing football’s age-old sores to fester

Those at the top are allowing the same issues to go unchallenged, says Michael Calvin