NEW YORK -- The dollar tumbled to a new low of 119.5 Japanese yen yesterday as Japanese investors continued to repatriate overseas profits and Treasury Undersecretary David Mulford said the United States wasn't worried about the yen's rise.
The dollar's previous low against the yen was 120.45 yen, set Jan. 4, 1988. The dollar closed at 119.72 yen, down from 121.04 yen Tuesday.
The dollar's slide against the yen began three days ago, as investors sought protection from the turmoil in European currencies and Japanese repatriated overseas profits -- particularly from Europe -- before the end of the first half of the Japanese fiscal year on Sept. 30. To do that, they sell other currencies for yen.
"The yen is obviously benefiting from the crosses and Mulford's comments," said John Lyman, senior customer dealer at the Bank of Tokyo.
Although an official at the Japanese Ministry of Finance said yesterday that the yen was not expected to appreciate in Tokyo last night, the government isn't likely to take strong action to curb its rise, said Terry Joyce, a trader at UBAF Arab American.
In fact, intervention by the Bank of Japan is viewed as largely ineffectual and investors might sell the dollar even more aggressively if they saw the Japanese central bank buying, said Alfonso Alejo, an assistant vice president of corporate sales at Mitsui Taiyo Kobe Bank.
"They'd have to spend $10 billion to $20 billion to keep the dollar from going down right now," he said. "They should probably wait until the speculation has run its course."
In other trading, the dollar advanced against many European currencies amid persistent doubts about the viability of the European rate mechanism, the system that ties some European currencies together.
The Bank of Spain tried to shore up the peseta by making it more costly to speculate against the currency.