Dollar's plunge against the yen halted

THE DOLLAR'S plunge against the yen was halted yesterday as expectations of official intervention in the currency markets climbed to fever pitch.

"A sense of anticipation has built up over the past 24 hours that some kind of deal is in the pipeline," said Mark Cliffe, chief economist at ING Barings. "The danger is that if it isn't delivered the dollar will break below 100," he added.

The dollar rebounded more than 2 at one stage yesterday, and was 1.60 higher at just over 106 at noon in New York. Sterling briefly hit a new high of 63.76p against the euro.

The excitement was generated by a spate of comments from Japanese officials indicating that joint intervention to halt the yen's climb and dollar's fall would be on the agenda at next weekend's meeting of G7 ministers and central bankers in Washington. Keizo Obuchi, the prime minister, said co-operation would be needed to halt the rise in the yen. "We need to think of all possible measures," he said.

Takashi Nakanomyo, vice-minister at the Economic Planning Agency, said: "A rapid rise in the yen is unfavourable." He was echoing concern that the 12 per cent appreciation in the yen in little over a month would derail the economic recovery.

Lawrence Summers, the US Treasury Secretary, yesterday repeated his usual comment: "A strong dollar is very much in the interests of the US." But there was speculation that Japan's deputy finance minister discussed intervention with Treasury officials during a visit yesterday.

Analysts said the European Central Bank and EU ministers would also be concerned in case the euro was dragged towards dollar parity in the crossfire.

Traders remained sceptical about the impact of combined intervention even as they went on red alert for any sign of it. "I am sure G7 will issue a statement on the need for currency stability but it is what they do that matters," said David Brickman, an economist at Paine Webber.

The real test lay with the Japanese authorities, analysts said. Although the Bank of Japan has sold about $35bn-worth of yen in the past three months, it offset any impact on Japan's economy by "sterilising" the intervention. This involves selling an equal amount of short-term government bonds to ensure the intervention does not affect domestic money supply.

A credible deal to weaken the yen would have to involve an end to this sterilisation. Masaru Hayami, governor of the Bank of Japan, has refused to alter the policy of sterilisation. But it is clear he has come under government pressure to agree to a move that might be a precondition for US co-operation in currency market intervention.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific