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Yen stays at 13-year high despite G7 concern on exchange rates

Yen stays at 13-year high despite G7 concern on exchange rates

The yen stayed at 13-year highs against the dollar in Asian trade yesterday as dealers, scared off by volatile equities markets, brushed aside a Group of Seven statement of concern on exchange rates.
The U.S. dollar was trading at 93.46 yen in Tokyo afternoon trade, still below the 94.24 level reached in New York late Friday. The dollar fell as low as 91.86 in early Tokyo trade.
The euro tanked to US$1.2536 from US$1.2623 and drifted down to 117.26 yen from 118.98, close to a six-year low.
The yen has been rising as investors seek cover from turmoil on financial markets by unwinding bets funded with cheap Japanese credit.
The Japanese currency has risen more than 10 percent in the past week against the dollar and nearly 13 percent against the euro as fears of a global recession batter global equities markets.
Finance ministers and central bank chiefs of the Group of Seven in a joint statement voiced concern about "excessive volatility" in the yen and its "possible adverse implications for economic and financial stability."
But dealers said that the statement had little teeth and may show that the Group of Seven - Britain, Canada, France, Germany, Italy, Japan and the United States - does not have the stomach for intervention.
"If it were a joint statement in a true sense, other G7 countries would be making back-up comments now," said Kenichi Yumoto, vice president of foreign exchange sales and trading at Societe Generale in Tokyo.
"It would be difficult to bring the yen down significantly unless they take drastic steps such as intervention."
The soaring yen makes Japanese goods less competitive overseas and has contributed to a sharp fall on Japan's Nikkei index, which plunged yesterday to a low unseen since 1982 before the economic bubble.
Finance Minister Shoichi Nakagawa warned that the government was watching the foreign exchange market "with great interest," heightening speculation that Japan would intervene.
"Under these unusual market conditions, we know that authorities are concerned about the yen's rise because everybody is concerned about it. What we need is an actual intervention," Hiroshi Maeba, senior dealer at Nomura Securities, told Dow Jones Newswires.
"Some players had speculated before the market opened that governments may intervene as early as today (Monday), so the statement disappointed us because it suggests that authorities are still a few steps away from actually selling the yen," he said.
Japan's monetary authorities have not intervened since March 2004, allowing the yen to find its own level against the dollar.
In regional Asian trade, the South Korean won stayed stable at 1,443 to the dollar after the central bank announced its biggest-ever interest rate cut of 75 basis points to shield the economy from the global crisis.
The Philippines peso sank to its lowest level against the dollar in nearly two years of 49.3500, leading the central bank to intervene.
The dollar also gained against other Asian currencies, going up to 10,700 Indonesian rupiah from 10,015, to 34.73 Thai bhat from 34.70, to NT$33.49 from NT$33.44 and to 1.5107 Singapore dollars from 1.5074.