Yen hits five-year high against the dollar

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The Independent Online

The Yen surged against a weakening dollar yesterday, coming close to the psychological 100 yen mark that would send alarm bells ringing among Japanese businesses.

The Yen surged against a weakening dollar yesterday, coming close to the psychological 100 yen mark that would send alarm bells ringing among Japanese businesses.

The dollar fell as low as 101.70 yen in early European trade, its lowest since January 2000, before recovering to 102.06 yen.

The move came amid speculation that finance ministers will use a key meeting in London next month to urge Asian countries to let their currencies rise against the dollar.

So far, the impact of the dollar's three-year decline has been borne by the euro, causing concern in Europe about exporters' competitiveness.

European central bankers made fresh calls last week for Asia to shoulder more of the burden. Ministers from the G7 nations could put specific pressure on China, which pegs its yuan to the dollar, to allow its currency to rise. Any revaluation of the Chinese currency would buoy other Asian currencies given the strong economic ties in the region.

Divyang Shah, a global strategist at the analysts Ideaglobal.com, said: "A break of 100.00 is the next signal the market needs to confirm that the foreign exchange game has changed significantly to one being focused on Asia. It's not surprising then that the smart money is using every available opportunity to load up on dollar/Asia short [positions]."

Japan undertook a record volume of intervention last year to counter the appreciation of the yen, but has held back after the G7's veiled criticism of government attempts to influence exchange rates. Mr Shah said Japan was unlikely to receive much sympathy from American and European G7 ministers who believe a rise in the yen is overdue after the 50 per cent surge in the euro.

The ECB's chief economist Otmar Issing is due to speak tomorrow and analysts said his comments would be watched closely, as would those of a series of US Federal Reserve officials who are due to speak to the press this week.

With the US markets shut yesterday, there was subdued trading around the world.

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