An interesting article from May 8 about Japan and the dollar:
.c The Associated Press
AP Business Editor
NEW YORK (AP) - The dollar fell for the fourth straight day against the yen Thursday in a broad selloff after remarks by Japan's top foreign-exchange policymaker suggested it could fall as low as 103 yen by yearend.
The comments from Eisuke Sakakibara, head of the Finance Ministry international finance bureau, stunned traders who less than a few weeks ago were speculating the dollar could touch 130 yen by the end of 1997.
The impact of his comments pushed the dollar to the lowest level in more than a month against the yen and left it sharply weaker against European currencies.
Although another top Japanese Finance Ministry official, Tadashi Ogawa, said later that Sakakibara was speaking hypothetically and didn't mean to imply a specific exchange rate, traders sold the dollar aggressively.
``If you read between the lines, Sakakibara is saying the dollar may be more vulnerable than the market believes,'' said Michael Malpede, senior foreign-exchange analyst at Refco Group Ltd., a Chicago brokerage firm. ``I think the message was more important than the level.''
In New York, the dollar cost 123.77 yen, down from 125.13 yen Wednesday and the lowest since April 3. The decline left the dollar down 2.80 yen or 2.2 percent this week.
Against the mark, the dollar dropped to 1.7083 marks, down from 1.7212 Thursday and down 2.1 pfennigs or 1.2 percent this week. The pound strengthened to $1.6200 from $1.6113.
Traders said the dollar was vulnerable to a decline even before Sakakibara spoke in an appearance before Japan's Parliament, reflecting resilient nervousness about possible central-bank intervention.
The Japanese news agency Kyodo reported Wednesday that central banks in the Group of Seven industrialized nations were preparing to sell dollars to prevent the yen from weakening further.
But it was Sakakibara's comments that became the main theme of the day. In remarks to the finance committee of the upper house of Parliament, Sakakibara said the dollar tends to move an average of 23 yen a year. Based on that past history, he said, the dollar could fall as low as 103 yen in 1997.
In addition, he said there is some risk for Japanese investors who are putting money in foreign assets and that Japanese government bonds may offer a better return than comparable U.S. Treasury bonds, a favored overseas purchase for many Japanese investors.
Sakakibara's utterances are scrutinized by the foreign-exchange market because he is widely credited with orchestrating the yen's gradual decline from postwar highs against the dollar two years ago.
``Sakakibara is like the Robert Rubin of Japan right now,'' said Jeffrey Yu, senior foreign-exchange trader at the New York branch of Sanwa Bank, referring to the U.S. Treasury secretary and his influence in the market.
``I think the significance of Sakakibara's statement is that he is warning Japan investors, `Please don't come crying to the government if the yen starts to appreciate,''' Yu said.
Others said the yen's strength also reflected the rising yields in Japanese government bonds, which are seen by some as a harbinger of rising interest rates in Japan and a possible expansion in its economy. Rates in Japan have languished at record lows since September 1995, depressing demand for yen and contributing to an outflow of investment money.
``The market is wondering if there's some Japanese economic growth going on, which would be a key to making the dollar fall against the yen,'' said Audrey McNiff, vice president of foreign exchange at Goldman, Sachs & Co.
Against that backdrop, she said, ``the market was somewhat nervous about the dollar, so when Sakakibara spoke traders were willing to react to his headline comments about dollar-yen trading at 103.''
Other late dollar rates in New York, compared with Wednesday: 1.4460 Swiss francs, down from 1.4610; 5.7610 French francs, down from 5.7965; 1,689.00 Italian lire, down from 1,701.25; 1.3847 Canadian dollars, up from 1.3820.
AP-NY-05-08-97 1656EDT
Market Data 
Markets 
AI
