17 September 2001, 10:34 Asia FX Review: BOJ intervention supporting USD/JPY
By Masataka Nakamura
Tokyo, Sept. 17 (BridgeNews) - Dollar/yen was boosted by foreign
exchange intervention by the Bank of Japan after it hit a low of 117.65.
Dealers said the intervention didn't change the underlying bearish
sentiment toward the U.S. dollar amid growing speculation the U.S. stock market will fall when it
resumes trading Monday and push the pair down sharply. The main focus was
dollar/yen trade Monday.
Early in the session, the dollar/yen gained ground, helped by
speculation the Bank of Japan would step in the market to support the
dollar/yen. However, the upward momentum fizzled after the market met
heavy selling pressure near 117.70.
Then, the pair fell later in the morning session, led by aggressive
selling from U.S.-based players. Some Japanese investment accounts were
also on the sell side.
However, the market changed course during Tokyo lunch time. Dollar/yen
soared after having hit an intra-day low of 116.65. Dealers said the Bank
of Japan was seen stepping into the foreign exchange market, pushing the
pair higher amid thin market conditions. They added the intervention was a
major contributor to pushing the pair up to above 118.00.
Masakazu Bunno, assistant general manager at the international trading
department at Sumitomo Sakura Bank Corporation (SMBC), said the dollar/yen
gain seemed to be largely explained by the Bank of Japan intervention.
Finance Minister Masajuro Shiokawa also confirmed Monday the Ministry
of Finance has taken "appropriate action." The comment was interpreted as
confirmation the Bank of Japan had intervened in the currency market.
BOJ was seen also in the afternoon, buying dollar/yen as high as
118.00, dealers said. They added that the Bank of Japan was aiming to
boost the pair rather than support it. However, the price performance
indicates that dollar/yen was still top heavy above 118.00.
The Japanese stock market suffered large losses, but the impact on the
currency market was limited.
Japanese shares fell steeply Monday as concerned investors looked
ahead to the resumption of U.S. markets later in the day following last
week's terrorist attacks. Friday's weak stock performance in Europe, along
with the yen's appreciation against the U.S. dollar added to the negative
tone. The Nikkei 225 Stock Average closed the session 504.48 points, or
5.04%, lower at 9,504.41, after reaching a morning low of 9,447.76.
Euro/dollar gained slightly, led by weakness in the dollar against yen
and Swiss Franc. However, overall trading was slow, with poor liquidity.
Through Monday's Asian session, euro/dollar was well capped near the
0.9280 area.
Overall, market conditions remained thinner than usual, because many
banks continued to refrain from FX trading on their own accounts even
during Asian time. Japanese banks in particular cut back their foreign
exchange operations.
Masakazu Bunno at SMBC said the poor liquidity exaggerated price action in
Monday's Asian trade. End
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