| Bank of japan hardens intervention tactics { February 25 2004 } Original Source Link: (May no longer be active) http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1077690681823&p=1012571727088http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1077690681823&p=1012571727088
Yen higher as BoJ hardens intervention tactics by Steve Johnson in London Published: February 25 2004 11:59 | Last Updated: February 25 2004 11:59 The dollar continued to soften against sterling on Wednesday after Tuesday's disappointing US consumer confidence data.
However the greenback actually strengthened against the yen, sitting at Y108.55 at 1140 GMT, against Y108.18 at Tuesday's New York close, on speculation that the Bank of Japan was now intervening to support the yen at the Y108 level against the dollar, rather than Y105 that has prevailed of late.
"The tactics of the Japanese authorities have clearly changed," said Derek Halpenny, currency economist at Bank of Tokyo-Mitsubishi. "There is a widespread belief that the Bank of Japan has been active in supporting the dollar at the Y108 level."
Mr Halpenny speculated that the switch may have been prompted by the approach of the fiscal year-end. Japanese exporters who use either a one-month moving average or a year-end value for the dollar/yen rate will report higher earnings if the dollar is stronger.
Furthermore, international opposition to the Bank of Japan's aggressive intervention has been "non-existent". Indeed, David Koehler, managing director of the International Monetary Fund, said The BoJ's intervention was appropriate, although it should just be a temporary measure.
With European currencies strong, Mr Halpenny forecast the yen could fall against sterling to Y210 and to Y140.60 against the euro in coming weeks.
The euro also retreated against the dollar despite a rise in German consumer confidence, from 5.1 to 5.2 in March, which, although modest, contrasted sharply with the weak Conference Board data from the US on Tuesday. However this was outweighed by soft German IFO business confidence data on Tuesday, which came in at 96.4 in February, against expectations of 97.6. The net result saw the euro settle at $1.2655 at 1140GMT,
Sterling was helped by strong UK GDP data, with growth in 2003 coming in at 2.3 per cent, trumping forecasts of 2.1 per cent, with the year-on-year rate for the final quarter revised up to 2.8 per cent, against estimates of 2.5 per cent. The figures were seen as increasing the likelihood of further UK base rate rises, pushing the dollar down to $1.8928 at 1140 GMT, from $1.8914 at the New York close.
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