By Karine G. Barzegar
Associated Press
NEW YORK — The yen plunged against the dollar yesterday, after the Japanese government reported higher-than-expected unemployment and stagnant consumer spending in January, triggering a sharp selloff on the Tokyo Stock Market.
Japan's unemployment rate stayed at a record high 4.9 percent in January, unchanged from a revised December figure but above the anticipated 4.8 percent, the government reported yesterday.
Spending by Japanese wage earners also remained unchanged in real terms in January compared to a year earlier.
Following Friday reports, the benchmark Nikkei Stock Average nose-dived 3.3 percent to close at a new 15-year-low of 12,262 points.
Currency traders also dumped their yen on growing worries over the outlook of the Japanese economy and the government's ability to pull Japan out of its worst economic slump since 1945.
In a surprise move, the Bank of Japan cut its official discount rate to 0.25 percent from 0.35 percent on Wednesday, in order to give a boost to the country's ailing economy.
"It seems that, despite the BOJ rate cut, Japanese equities continue to be sold off," said John Cholakis currency trader at Dai-Ichi Kangyo Bank.
Bad economic data out of Japan, combined to Nikkei's drop and the ongoing political instability in the country, are hurting the yen, currency traders said.
"The situation is Japan is deteriorating rapidly and both the dollar and the euro continue to be strong against the yen," Cholakis said.
The dollar began its rally against the yen in Japan trading, and gained almost 2 yen Friday to hit an intraday high of 119.32 yen — its highest level since Jan. 18 when it hit 119.90 yen.
In late New York trading, the U.S. currency was quoted at 119.16 Japanese yen, up from 117.39 yen.
The dollar is likely to break through the key level of 120 yen soon, traders said.
In other trading, the dollar was down against other major currencies yesterday.
Boosted by heavy yen selling across the board, the euro continued to rise against the dollar to trade at its highest level since Jan. 17.
In late New York trading, the euro was quoted at 93.52 cents, up from 93.17 cents late Thursday.
The European single currency also jumped against the yen to hit an intraday high of 111.73 yen yesterday.
The long-suffering euro has gained more than 11 cents against the dollar (and about 22 yen against the Japanese currency), since it hit the record lows of 82.29 cents and 88.93 yen on Oct. 26.
"The short-term trend is up for the euro," Cholakis said. "It looks like the European Central Bank is on hold and the Federal Reserve is cutting (U.S. interest rates) which should support the European equity market."
Currency traders said they expected the euro to test the 96 cents level again in coming weeks.
In other trading, the dollar also was quoted at 1.6453 Swiss francs, down from 1.6500, and 1.5453 Canadian dollars, down from 1.5487. The British pound rose to $1.4715 from $1.4575.
Currencies of the 12 countries participating in the euro are no longer traded separately and are tied to the euro by a fixed rate. Based on yesterday's euro rate, the dollar was worth 2.0912 German marks, down from 2.0994; 7.0137 French francs, down from 7.0412; and 2,070.23 Italian lire, down from 2,078.44.
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