Dollar Up Against Yen, Mixed Elsewhere
NEW YORK (AP) _ The dollar strengthened against the yen late Tuesday on a rumor sweeping through the foreign exchange market that top Japanese and U.S. officials had privately agreed on an exchange rate of 120 yen to the dollar.
The rebound largely erased the dollar’s retreat against the yen Monday and pushed the dollar back toward the 112-yen level reached last week, the highest in 2 1/2 years. Against other currencies, the dollar was mixed.
In late New York trading the dollar cost 111.65 yen, up from 111.12 Monday. The dollar cost 1.5290 marks, down from 1.5312. The British pound cost $1.5630, down from $1.5635.
Trading was largely non-eventful until late in the afternoon in New York when an unsubstantiated rumor spread that Eisuke Sakakibara, head of the Japanese Finance Ministry’s international finance bureau, had said U.S. officials told him they could tolerate a dollar that cost 120 yen.
``There was some very heavy buying of dollars in the market″ on that rumor, said Stephen Flanagan, a senior foreign exchange trader at the New York branch of Credit Agricole.
Others said the rumor lacked credibility and noted that its timing was unusual, as it emerged during the middle of the night in Japan.
A 120-yen level likely would alarm U.S. exporters because it hurts their ability to sell goods in Japan. Many already have expressed concern about the dollar’s 35 percent gain against the yen since the lows reached in 1994.
But it was hard to dismiss such a rumor because Sakakibara is considered one of the most influential exchange-rate policymakers in Japan.
``The Sakakibara rumor seems to be going around,″ said Gary Sakamoto, vice president at the National Australia Bank in New York. ``Sakakibara has always supported a stronger dollar.″
The rumor had far more impact than remarks at a New York conference several hours earlier by U.S. Deputy Treasury Secretary Lawrence Summers, who reiterated the Treasury Department’s support for a strong dollar. Traders paid little attention to Summers, who called his statement nothing new.
Against European currencies, the dollar traded in narrow ranges throughout the day. It was affected indirectly by a series of statements from senior German central bank officials that showed their skepticism about the European plan for a single currency in 1999.
The strongest comment came from Franz-Christoph Zeitler, head of the regional German central bank of Bavaria, who said it’s better to postpone the debut of the currency than dilute the strict criteria for countries that want to participate.
Such talk has tended to strengthen the mark against other European currencies, but its impact was relatively brief on Tuesday and the mark still ended largely weaker.
``It just goes to show you these comments are being overlooked at the moment,″ said Bob Near, a vice president at the Bank of New York. ``What the market believes is that the European monetary union is going forward.″
Others said the foreign exchange market eventually will focus more intensely on the timetable for European monetary union as the deadline for entry nears.
``This is by no means anywhere near being achievable at the moment,″ said Tim Summerfield, senior foreign exchange trader at the First National Bank of Boston. ``I think it’s something that will eventually come, it’s just a question of time.″
Other late dollar rates in New York, compared with late Monday: 1.2533 Swiss francs, down from 1.2543; 5.1657 French francs, down from 5.1728; 1,516.70 Italian lire, up from 1,514.60; 1.3540 Canadian dollars, up from 1.3531.