Sun, Oct 19, 2003 - Page 10 News List

Euro gains on Bush's comments to Koizumi about yen

AFP , LONDON

The euro gained ground on the dollar here Friday after US President George W. Bush gave what traders saw as a mild warning to Japan to refrain from market intervention aimed at holding down the yen.

The single currency in late-day transactions was trading at US$1.1636, up from US$1.1589 in New York late on Thursday.

The dollar was at ¥109.53 against ¥109.83 on Thursday.

Bush told Japanese Prime Minister Junichiro Koizumi in Tokyo that he backed a "strong dollar" and that markets ought to determine exchange rates, a top US official said.

"The president once again reiterated his support for a strong dollar and for market-determined exchange rates," said the official, who was briefing reporters on condition of anonymity.

No promises

Asked what Koizumi's response was, the official replied: "The prime minister did not make any firm commitments" but warned that rapid currency fluctuations could "upset the market."

A senior Japanese foreign ministry official said that Koizumi had told Bush he welcomed Washington's maintenance of a strong dollar policy as "it is beneficial for the Japanese economy."

But in an apparent reference to the recent weakness of the dollar, which dropped swiftly to near three-year lows of below ¥109 from around ¥117 a month ago, the prime minister warned that Japanese authorities reserved the right to intervene.

"We will take measures in dealing with wild fluctuations of the market," Koizumi said.

Here in London the Bush comments were seen as a mild warning against sustained Japanese intervention in currency markets.

"The dollar is finishing the week a tad softer but within its trading range," said Neil Mackinnon, a hedge fund economist.

"The Bush comments don't strike me as particularly momentous ... the markets will largely greet these comments with a yawn," he added.

He said the markets may be poised to probe the downside in dollar/yen next week, adding that there is a chance the 108 level could be tested if something unexpected occurs during the weekend to suggest greater Japanese acceptance of Bush's view.

"We've got a high risk situation over the weekend," said Steve Barrow, chief currency strategist at Bear Stearns. "The market is covering its back ahead of that."

"It's one of those situations when we're waiting for nothing to happen and that's probably what's going to happen," he added.

That conclusion is more than likely given that Japan has just volunteered to donate US$1.5 billion to the reconstruction of Iraq, said Barrow.

"The US is not really going to turn around and be critical," he said.

Friday's strong US data failed to have much of an impact as markets squared positions ahead of the weekend.

The euro was changing hands at US$1.1636 from US$1.1589 late on Thursday in New York, ¥127.47 (¥127.34), £0.6957 (£0.6924) and 1.5527 Swiss francs (Sf1.5483).

The dollar was being quoted at ¥109.53 (¥109.83) and 1.3342 Swiss francs (Sf1.3345).

The pound was at US$1.6729 (US$1.6727), ¥183.22 (¥183.80) and 2.2325 Swiss francs (Sf2.2330).

On the London Bullion Market, the price of an ounce of gold fell to US$370.50 from US$373.40 on Thursday afternoon.

This story has been viewed 3355 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top