Dollar hits record lows against the Japanese yen

April 01, 1993|By New York Times News Service

NEW YORK -- The dollar fell to record lows against the Japanese yen yesterday as traders continued to test how far the United States would let the dollar fall in its efforts to put pressure on Tokyo to cut its bloated trade surplus.

In late New York trading, the yen was trading at 114.79 to the dollar, slightly above the record low of 114.55 reached earlier in the day but well below its Tuesday close of 116.55.

(As of midday Thursday in Tokyo, the dollar had fallen even further, to 114.60 yen.)

The rush to sell dollars to buy yen was probably exaggerated by a number of special factors yesterday, which marked the end of a month, the end to a quarter and the end of Japan's fiscal year.

But the sharp drop in the dollar yesterday served only to accelerate a trend: over the last three months, the dollar has fallen more than 8 percent against the yen.

"I think much of what happened yesterday was due to a fairly dramatic repatriation of yen," said Robert A. White, a senior vice president at Standard and Chartered Bank in Los Angeles, "But I am inclined to believe the overall downward direction has to get down to trade."

Since President Clinton took office, Japan has come under increasing pressure to cut its trade surplus with the United States.

To accomplish that goal, various administration officials -- most notably Treasury Secretary Lloyd Bentsen -- have said they would like to see the yen rise in value against the dollar as a way of making American exports cheaper in Japan and Japanese imports more expensive.

Given the continuing problems in the Japanese economy, the yen's current value against the dollar is difficult to justify on a fundamental basis, even with Tokyo's huge trade surplus, analysts said.

At the same time, they acknowledged that market and political pressures were likely to push up the yen even further against the dollar.

"From a purely fundamental viewpoint, it is hard to understand why the yen is doing so well," said Liliana Nealon, executive vice president at FX Concepts, a research and fund management firm in New York.

"But we could go to 113, or the psychologically critical level of 110," she said, referring to the number of yen to the dollar. "And even if it falls below that level, with all this trade friction, I don't think the Bank of Japan would make much of an effort to support their currency."

Ms. Nealon and others said a decline in the dollar to 110 yen or lower would elicit heavy protests from Japanese exporters, who likely would attempt to apply pressure on the Bank of Japan to stem the yen's rise.

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