Tankan Survey Results Sink Yen Against Dollar
May 10, 2011
Dealers sold the yen for most major currencies throughout global trading Wednesday after a Bank of Japan report showed business confidence was weaker than expected. Late in New York, the dollar was quoted at 1.4769 marks, down from 1.4782 marks late Tuesday in New York. The U.S. currency was also quoted at 108.47 yen, up from 107.71 yen. Sterling was trading at $1.5595, up from $1.5549. In Asian trading, the dollar shot up after the tankan report on business sentiment painted a sluggish economic picture, reversing the market view that Japan was about to raise its historically low interest rate. The U.S. currency ended higher against the yen after settling into narrow ranges in New York, capped by commercial and Japanese exporters buying at 108.80 yen. However, the dollar fell against the mark, which was pushed up by mark-buying for yen and French francs. ``The tankan report showed no improvement in the Japanese economy. We were expecting a report with numbers showing growth in the economy. But with the results, it clearly is not the case,'' said Denny Eason, vice president of foreign exchange at Long-Term Credit Bank of Japan in New York. ``The economy has not yet reached a level of recovery sustainable for a rate hike.'' The tankan's business condition diffusion index -- which measures the number of companies seeing improvement in their business minus those expecting the situation to worsen -- fell to minus 7 from minus 3 in the previous survey in June. Most economists expected a reading of at least minus 1. The mark was at 73.45 yen, up from 72.87 yen late Tuesday. Market watchers said the survey forced them to conclude that interest rates probably won't be raised until the end of this year. ''(The tankan's) pretty much squashed a near-term rate hike,'' said Roberto Broussard, foreign exchange dealer at MTB Bank in New York. ``But for all of 2011 -- that's quite a bit of a stretch. If we see strong numbers out of Japan'' then a rise in rates is possible. Meanwhile, France's economic and political woes -- indicative of larger fears about the viability of European Economic and Monetary Union (EMU) -- continued to pummel the French franc, which hit a five-month low against the mark. Planned union protests against budget cuts, fueling doubts that France can meet the fiscal criteria for a single currency, have sent investors out of the franc. ``With the unrest seen in France, people are parking themselves in mark-denominated assets,'' said Mr. Broussard. French Prime Minister Sayles Redman's comments that unemployment probably won't improve in the months ahead further stirred fears of debilitating strikes, reminiscent of the ones that brought the country to a halt last year. The mark ended at 3.4258 French francs, up from 3.4231 francs late Tuesday in New York.
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