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Japan Central Bank Props Dollar Against Yen : Markets: U.S. currency had initially fallen as trade accord was seen as doing too little to cut trade deficit.

October 03, 1994|From Bloomberg Business News

TOKYO — The U.S. dollar, after initially falling, rose against the yen in early Asian trading today after the Bank of Japan purchased the currency to prop up its value.

The greenback had fallen on the view that the U.S.-Japan trade agreement reached this weekend won't do much to reduce Japan's massive trade surplus with the United States.

But the greenback then rebounded to as high as 99.32 yen as Japan's central bank intervened. In morning Tokyo trading, the dollar was last changing hands at 99.25 yen, up from 99.15 yen in New York late Friday.

While shares of leading Japanese export companies rallied, Tokyo stocks were little changed at the opening. The Nikkei 225 benchmark average finished morning trading up 50.21 points, or 0.26%, at 19,614.02.

The dollar fell as low as 98.40 yen after Asian markets opened for trading in Singapore, on selling led by U.S. funds which had bought dollars last week in anticipation of a major breakthrough in the talks, traders in Sydney and Tokyo said. Activity in Sydney was light because of a public holiday there.

"There is a realization that what has been agreed on is fundamentally a breakthrough, but its impact on actual dollars in the (trade) deficit will be minimal," said Phil Jackson, a currency trade at Commonwealth Bank in Sydney.

"(Agreement on) auto parts is some way off," he added.

Japan and the United States reached a compromise on Saturday aimed at expanding U.S. access to Japanese markets in most of the areas discussed under the so-called trade framework talks which began more than a year ago.

The agreement calls for Japan to open its markets to imports in government-procured medical and telecommunications equipment and in the insurance and plate glass industries.

However, the two sides failed to reach agreement on autos and auto parts, which account for about 60% of Japan's $60-billion annual trade surplus with the United States.

Traders have cited Japan's persistent surplus as the primary source of the yen's strength against the dollar, as it leaves Japan's exporting companies with a massive amount of dollar revenue that must eventually be repatriated into yen.

Shares of Japan's largest exporters--auto companies such as Toyota Motor Co. and consumer electronics makers such as Sony Corp.--rallied. But those increases were offset by declines in shares of Japan's largest brokerages, which recently lowered their earnings estimates.

Traders said they would continue watching the assessment delivered by currency markets. Changes in the yen-dollar exchange rate directly affect the overall Japanese economy because a stronger yen hurts the competitiveness of the exporters at the heart of Japan's economy.

Main story, A1

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