Business | Economy
Dollar gains against yen on Japan recession
The dollar rose against the yen yesterday after the Bank of Japan followed last week's interest rate cut with a warning that the health of Japan's economy has deteriorated and is likely to get worse.
- Reuters
- Published: 23:36 December 22, 2008
New York: The dollar rose against the yen yesterday after the Bank of Japan followed last week's interest rate cut with a warning that the health of Japan's economy has deteriorated and is likely to get worse.
But investors' equally dim view of the US economy hurt the greenback against the euro, which rose broadly in holiday-thinned trade.
Doubts about whether a US automaker bailout would steer the economy out of recession also hit the dollar.
Traders said volumes were razor-thin in the lead-Up to the Christmas holidays, aggravating even the slightest moves in the currency markets. Still, many said demand for dollars remained low.
"The dollar view is so opaque at the moment, and the risk reward at this time of year is not worth it unless you really have to trade," said Maurice Pomery, head of foreign exchange at IDEAglobal in London.
The dollar managed to rise above 90 yen for the first time in nearly a week after BoJ Governor Masaaki Shirakawa said yen strength and a global slowdown may force Japanese exports still lower even after a record plunge in November.
"All Asian exporters are at risk in this global economic slowdown, but Japan is at the top of the list," said Dustin Reid, senior currency strategist at RBS Global Global Banking & Markets in Chicago. "The stronger yen has been playing havoc for Japanese exporters, and the auto companies in particular are likely to be significantly affected." So far this year, Japan's currency is up nearly 20 per cent against the dollar and more than 22 per cent against the euro.
Early in New York, the dollar was changing hands at 89.85 yen, up 0.8 per cent, after earlier rising to 90.23.
The euro also rose 1.3 per cent to 125.79 yen and added 0.5 per cent to $1.3994 after earlier hitting a session peak of $1.4123. Sterling fell 0.8 per cent to $1.4814 while the euro rose 1.1 per cent to 94.35 pence, near a record high of 95.56 pence touched last week.
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