Dollar Rebounds, Stocks Gain
TOKYO (AP) _ The dollar rebounded today from four consecutive sessions of record lows against the yen, encouraging investors to push up prices on the Tokyo Stock Exchange.
The dollar closed at 99.50 yen, up 0.83 yen from Monday’s finish and also above its overnight close of 98.90 yen in London. New York markets were closed Monday for the Independence Day holiday.
Spot trading totaled $7.960 billion, up from Monday’s $5.944 billion.
Monday’s close of 98.67 yen was the lowest since modern exchange rates were established in the late 1940s. It was the seventh such record low in nine sessions.
The dollar gained today in part because of speculation that the United States soon will increase its interest rates to forestall inflationary pressure, traders said.
The U.S. Federal Open Market Committee meets today and Wednesday in Washington. The committee is expected to discuss the dollar’s recent slide and take measures against inflation.
Higher interest rates make a nation’s currency more attractive to investors, while a rate cut could encourage spending and more borrowing for investment.
The dollar also benefited in Tokyo from U.S. investors and Japanese banks buying the currency to cover oversold positions ahead of the Group of Seven summit in Naples later this week, said Tamaji Ikehata of Tokai Bank.
″Market players generally believe that the summit will take coordinated action against the dollar’s recent weakness,″ Ikehata said.
The stronger yen has hurt Japan’s export-oriented economy by making Japanese products less competitive abroad as the nation struggles to pull out of a 3-year-old recession.
So far in 1994 alone, the dollar has fallen nearly 14 yen, or about 12 percent. The dollar tumbled because of the prospect of possible U.S. inflation and a persistent market belief that Washington favored a higher yen to help reduce its $59 billion annual deficit in trade with Japan.
Meanwhile, the 225-issue Nikkei Stock Average rose 202.44 points, or 0.98 percent, closing at 20,834.37. On Monday, the benchmark average had gained 88.52 points to 20,631.93.
The Tokyo Stock Price Index of all issues listed on the first section was up 10.76 points, or 0.64 percent, to 1,683.49. It had gained 10.57 points to 1,672.73 the previous day.
Share prices advanced as investors were encouraged by the dollar’s strength, dealers said.
Volume on the first section was estimated at 400 million shares, up from Monday’s 249 million.
Advances outnumbered declines 686 to 338, with 164 issues unchanged.
The price of the benchmark No. 164 10-year Japanese government bonds closed at 98.16 yen, down 0.69 yen from Monday’s close. Their yield rose to 4.375 percent from 4.270 percent.
The government bond prices dropped on news reports speculating that the government soon would flood the market with deficit-financing bonds to pay for current income tax cuts, a measure taken early this year to encourage domestic spending and reduce the nation’s huge trade surplus.