Dollar Plunges, Stocks Slip
TOKYO (AP) _ The dollar plummeted against the yen today, buffeted by reports indicating Washington still favors a strong yen to pare Japan’s trade surplus. Stocks slipped in light trading.
The dollar closed the week at 106.35 yen, down 2.25 yen from Thursday’s finish and also below its overnight finish in New York at 108.70 yen. After opening at 108.55 yen, it ranged between 106.35 yen and 108.80 yen.
Traders said the dollar dropped amid heavy selling in the afternoon on news reports that the Clinton administration favors a strong yen as a way of reducing Japan’s huge trade surplus.
″It’s almost a free fall,″ said Shozo Motomura, a dealer with Sakura Bank. ″I felt dizzy.″
The dollar, which fell by 1.97 yen on Thursday in what traders called a correction to its recent recovery from a historic low of 104.82 yen last week, has now lost most of its gains.
The yen was pummeled earlier this week following the splintering of the ruling Liberal Democratic Party. The breakup means that they may lose their majority in Parliament, and thus the premiership, in elections July 18 for the first time in almost four decades.
But Motomura said that if the Liberal Democrats either maintain their current strength or win in Sunday’s Tokyo city assembly elections, the dollar will be sold further.
The dollar has fallen steadily this year on comments by U.S. officials favoring a stronger yen as a way to cutting Japan’s trade surplus. But in the last few weeks, U.S. officials have become more cautious about discussing currencies.
During the morning session, the dollar remained in a narrow range after a remark by U.S. Treasury official Lawrence Summers.
Summers, undersecretary for international affairs, told reporters that foreign exchange rates should reflect economic fundamentals, and that excessive volatility can be counterproductive to world growth. He is in Tokyo for a series of trade talks.
On the stock market, the 225-issue Nikkei Stock Average closed at 19,659.57 points, down 25.50 points, or 0.13 percent, from Thursday’s finish of 19,685.07 points.
The Tokyo Stock Price Index of all issues listed on the first section fell by 0.03 points, negligible in percentage terms, to 1,584.05. On Thursday, the TOPIX rose 21.69 points, or 1.4 percent, to close at 1,584.08 points.
Hirotsugu Ishii, an analyst with Yamatane Securities, said the market languished as many investors remained on the sidelines to see how Japan’s political situation will move toward July 18 national parliamentary elections.
An estimated 260 million shares changed hands on the first section, up slightly from Thursday’s 250 million shares. Advancing issues outnumbered decliners 522 to 468, with 164 unchanged.
The price of the benchmark No. 145 10-year Japanese government bond closed at 106.84 yen, up 0.10 yen from Thursday. The yield fell by 0.015 percentage point to 4.410 percent.