Posted on: Saturday, April 14, 2001

Yen falls after weak economic report

Bloomberg News Service

The yen fell, reversing recent gains against the dollar, after the Japanese government downgraded its appraisal of the economy for the third straight month.

The yen weakened to 124.33 per dollar from the 123.58 yen set in late New York trading. It also fell to 110.75 per euro from 110.30 in New York.

Currency markets were closed in Europe and the United States yesterday for the Easter holiday. European markets don't reopen until April 17.

"Sentiment toward the yen hasn't improved," said Keisuke Kitao, a foreign exchange manager at Bank of Tokyo-Mitsubishi Ltd. He said the Japanese government's dim assessment of its economy indicated that the yen's 2.6 percent gains since its April 2 low cannot be justified given Japan's economic fundamentals.

The yen fell following a government report saying the economy is weakening, the first time since September 1995 that the monthly report used the word "weakening" to describe the economy.

The Japanese economy probably grew by 0.5 percent in the three months ended March 31, according to the latest Bloomberg News survey, after growing 0.8 percent in the fourth quarter last year.

Some experts have said they expect the yen could hit 130 or higher. Experts said yesterday that declines in the yen are likely to be limited on speculation the United States may ease its strong-dollar policy. But, they said, boosting consumer spending and the economy in Japan will be key to the yen's ultimate strength.

Investors and traders said a key factor will be who is chosen April 24 to replace Yoshiro Mori as Japan's next prime minister. Four candidates, including former prime minister Ryutaro Hashimoto, are running for the post.

"Whoever wins, the yen will be sold if the new administration fails to boost investor confidence," said Kosuke Hanao, a senior foreign exchange manager at Industrial Bank of Japan Ltd.