Japan Intervenes to Support Dollar

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Japanese intervention sends yen lower
By Christopher Swann and Jennifer Hughes
FT  Published: September 26 2001 19:21 | Last Updated: September 26 2001
19:30

Another round of intervention by Japan forced the yen lower against the
dollar on Wednesday.

The action - conducted by the European Central Bank on behalf of the
Bank of Japan - is thought to be the fifth intervention in the past
eight trading days.

At the start of the London session the dollar was trading around
¢D117.2. The intervention pushed it up to around ¢D117.8, where it
hovered for the rest of London trading.

The determination among Japanese policymakers to prevent a rise in the
yen is becoming increasingly evident.

Analysts are estimating that they have purchased anything up to $20bn
since the beginning of last week. The frequency has also been impressive
and most now expect Japanese intervention to become an almost daily
event.

The fact that the Japanese are not only buying dollars but euros as well
is significant, said Paul Lambert, director of currencies and fixed
income at Deutsche Asset Management in London. "The buying of euros,
even though the euro-yen cross has not reached particularly extreme
levels, is an indication of their  determination to prevent a rise in
the yen," he added.

The Japanese authorities will be hoping, he said, that the flows back
into the yen will abate after this week, which marks the end of the
financial half-year. Financial institutions traditionally repatriate
foreign assets back into yen in the run-up to these accounting periods
in order to make their balance sheets look better.

But Mr Lambert said this was unlikely to mark the end of upward pressure
on the yen, since rising risk aversion was making Japanese investors
reluctant to invest overseas.

Paul Chertkow, head of currency research at Bank of Tokyo-Mitsubishi,
said it was most important that Japan should keep the dollar above
¢D115. Much below this, he said, and Japan's export industry would
suffer.

Steven Saywell, senior currency strategist at Citibank, said there was
no guarantee that even aggressive intervention would stop the yen from
rising.  "Between May and September 1999 the Japanese intervened to the
tune of nearly $50bn," he said. "Yet the dollar fell from ¢D125 to
¢D105."