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Dollar Tumbles Below 100 Yen in Tokyo, Stocks Plunge

June 27, 1994

TOKYO (AP) _ The dollar tumbled today to its first close below 100 yen since World War II, prompting calls in Japan for stronger central bank action to halt the yen’s climb.

The strong yen makes Japanese products more expensive abroad, and that discouraged traders on the Tokyo Stock Exchange, where one key market index sank 2.24 percent. Hong Kong’s main stock index fell 2.6 percent, with brokers citing the effects of overseas stock and currency market turmoil.

The dollar closed at 99.93 yen in Tokyo, down 0.47 yen from its previous low of 100.40 yen set Friday in Tokyo.

Today’s finish marked the first time the dollar had ended below 100 yen in Tokyo since modern exchange rates were established in the late 1940s.

The U.S. currency has fallen 5.45 yen, or 5.2 percent, in the last three weeks, closing at postwar lows on three of the last four trading days.

But the dollar inched higher against the yen as trading moved to Europe and was stabilizing against European currencies as well.

By early afternoon in London, the dollar was being quoted at 100.15 yen.

The dollar sank to a 13-month low of 1.5725 German marks in early European trading today, but it bounced off its morning lows and was trading at 1.5815 marks by early afternoon compared with 1.5865 marks late Friday.

The yen’s rise has been seen as a setback for Japan’s efforts to recover from a 3-year-old recession, and Japanese officials also say the sinking dollar can cause inflation in the United States.

A stronger yen hurts Japanese exporters by shrinking the value of the profits they bring back to Japan. It also forces them to raise prices overseas, making their products less competitive.

While it theoretically makes U.S. products less expensive in Japan, government surveys have found that these savings often are not passed on to consumers. In addition, Japan’s recession has discouraged buying.

In today’s trading, the dollar ranged between 99.50 yen, its lowest intraday level ever, and 100.30 yen.

Toshihiro Nagata, deputy general manager of Sanwa Bank, said the dollar fell through the psychological barrier of 100 yen despite aggressive dollar- buying intervention by the Bank of Japan.

The central bank bought $2 billion in today’s trading, the semi-public Japan Broadcasting Corp. reported. The central bank does not comment on its market activities.

There was an unconfirmed rumor in the market that Germany’s central bank also stepped in by buying dollars, Nagata said.

A coordinated effort by 18 central banks Friday to prop up the dollar had limited results.

Traders said the dollar was sold by institutional investors fearful of inflation in the United States. The recent attack on the dollar has led to speculation that the U.S. Federal Reserve Board will soon boost interest rates for a fifth time this year.

″Sentiment toward the dollar remains very bearish,″ said Yasuhisa Ishida, a dealer with Mitsui Trust and Banking.

Hideaki Kumano, administrative vice minister in the Ministry of International Trade and Industry, said he the yen’s series of record highs was unfavorable for the world economy and ″does not reflect fundamental conditions of economies of Japan and the United States.″

Shoichiro Toyoda, chairman of Toyota Motor Corp. and head of the powerful Federation of Economic Organizations, urged monetary authorities to strongly intervene in the market in concert with other nations’ central banks.

It was Toyoda’s second statement expressing worries about the yen in four trading days.

On the stock market, the 225-issue Nikkei Stock Average shed 465.79 points, closing at 20,300.96. On Friday, the average had fallen 273.46 points, or 1.29 percent, to 20,766.75.

The Tokyo Stock Price Index of all issues listed on the first section fell 23.29 points, or 1.39 percent, closing at 1,649.78. It had slipped 8.17 points, or 0.48 percent, to 1,673.07 on Friday.

An estimated 350 million shares changed hands on the first section, down from Friday’s 355 million. Declines overwhelmed gains 1,006 to 89, with 95 issues unchanged.

″The No. 1 cause is the instability of the dollar,″ said Mitsuru Kanno, an analyst with Wako Securities.

The benchmark No. 164 10-year Japanese government bonds closed at 98.92 yen, down 0.16 yen from Friday’s close. Their yield rose by 0.025 percentage point to 4.260 percent.

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