Posted on: Saturday, September 20, 2003

Yen soars in value against U.S. dollar

Bloomberg News Service

NEW YORK — The yen surged to its highest against the dollar in more than two years on speculation that a meeting of finance ministers from the Group of Seven major industrial countries could lead to less government involvement in currency markets.

U.S. Treasury Secretary John Snow said he will ask the G-7 to change its policy for the first time in more than six years and back "flexible" currency exchange rates.

"The world trading system works best under a regime of market-based exchange rates," Snow told reporters as he left Pakistan for the G-7 meeting in Dubai this weekend.

Japan's currency rose to 113.99 yen per dollar in New York trading from 115.25 yesterday, the highest since Jan. 4, 2001.

(A stronger yen is usually welcomed by the Hawai'i tourism industry because it makes the Islands more affordable for Japanese visitors. On the other hand, the Japanese government has been trying to keep the yen from getting too strong because a weak yen helps Japanese exporters.)

Bank of Japan Governor Toshihiko Fukui told reporters yesterday that "it's not good to react hastily to currency moves," suggesting the central bank may let the yen strengthen after a more than 3 percent advance this week against the U.S. dollar.

"We could see a Japanese government more willing to let the yen appreciate," said David Durrant, chief currency strategist in New York at Bank Julius Baer & Co., with about $76 billion in assets under management. "The Bank of Japan has been adopting a more defensive stance in the currency markets instead of an aggressive one."

G-7 officials "are acknowledging there are imbalances, which means they're acknowledging the dollar should go down," said Marcel Kasumovich, a currency strategy for Merrill Lynch & Co. in New York.

The main "imbalance" is between Asia and the U.S., Kasumovich said. The Bank of Japan sold a record amount of yen this year to stem gains in the currency that threaten the country's export-led recovery. China pegs its currency's value to the dollar.