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Dollar Rises vs. Yen, Stocks Mixed

September 16, 1998

TOKYO (AP) _ The dollar rose against the yen Wednesday morning amid speculation that the Federal Reserve Board will not cut interest rates anytime soon. Stock prices rose slightly.

The dollar bought 134.38 yen in early trading, up 1.80 yen from late Monday in Tokyo and also above its late New York rate of 133.90 yen.

Financial markets in Japan were closed Tuesday for a national holiday.

The dollar benefited from comments from a Fed governor suggesting that a U.S. interest rate cut may not be imminent. Edward Gramlich, speaking at a global economic conference in Pittsburgh, said Tuesday that inflation was a greater threat to the U.S. economy than deflation.

That view contradicted the impression held by financial markets that the Federal Reserve was prepared to cut interest rates if it would help the economy overcome the negative effects of Asia’s spreading financial crisis.

Lower interest rates make a nation’s currency less attractive to investors.

On the Tokyo Stock Exchange, share prices were buoyed by the gains on Wall Street and hopes that the Japanese ruling party will reach an agreement with the opposition on urgently needed banking reform bills.

The Nikkei Stock Average rose 47.01 points, or 0.33 percent, to 14,274.38 at the end of the morning session. On Monday, the Nikkei closed up 310.39 points, or 2.23 percent.

Traders were encouraged by reports the government is ready to accept opposition demands for a temporary nationalization of ailing Long-Term Credit Bank of Japan in return for support on bills to clean up the banking system.

The Tokyo Stock Price Index of all issues listed on the first section was up 4.59 points, or 0.42 percent, to 1,088.75. On Monday, the TOPIX closed up 12.68 points, or 1.18 percent.

The yield on the benchmark 10-year Japanese government bond was 0.765 percent, down from 0.775 on Monday, driving its price up to 114.84 from 114.76.

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