Wednesday, November 10, 2004

The yen is bouncing like a rubber ball off the playground blacktop as private capital realizes it hasn't the stomach to play chicken with the Bank of Japan.
The yen fell by the most against the dollar in six months on concern Japan will sell its currency to protect exports and economic growth.

Demand for the yen waned as it approached 105.50 per dollar, a level traders including Scott Schultz at Brown Brothers Harriman & Co. said might be near the Bank of Japan's threshold for currency sales.

``We've seen some jawboning recently from Japanese officials,'' who have said they won't allow the currency to strengthen more than justified by prospects for economic growth, Schultz said. ``People are a little skittish of taking dollar-yen below 105.50.''

Japan's currency weakened to 107.24 yen at 10:22 a.m. in New York from 105.67 yesterday, according to electronic foreign- exchange dealing system EBS.
Of course, this isn't all due to jawboning. There are indications that central banks are big consumers of the $51bn in debt the US Treasury is issuing this week. And where there's smoke -- central banks buying dollars -- there is always a hell of a lot of Japanese fire.

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