News of Yuan becoming flexible makes Yen reach for the sky |
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Fri, 29 Apr 2005 23:00
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After news by a Chinese publication that China, Japan’s biggest export market, could loosen its exchange rate at any time, the yen was seen soaring against the dollar as well as the euro.
The China Securities Journal, affiliated to Xinhua, China’s official news agency, declared that according to analysts (unnamed), the government had planned to alter its fixed exchange rate. There were possibilities now with a stronger yuan that China’s cut-throat export competition with Japan would be considerably lessened. Robert Rennie, a currency strategist at Sydney’s Westpac Banking Corp., said , “Each time we have comments from within China that conditions are ripe for foreign exchange moves, the dollar and the euro lurch lower against the yen.”
| According to electronic currency-dealing system EBS, the yen jumped to 105.27 against the dollar at 7:20 a.m. in London as compared to 106.13 at late hours yesterday in New York. It was seen rising to 136.51 per euro from the erstwhile 136.84 while the dollar stood at $1.2964 per euro after soaring from $1.2893.
Following announcements of the yuan becoming more flexible under pressure by foreign governments, by Chinese central bank Governor Zhou Xiaochuan on April 25, the Japanese yen rocketed to a one-month high of 105.27 per dollar. The yuan had not shifted since 1995 from its 8.3 per dollar position.
According to a median of 60 forecasts by a Bloomberg survey, The National Association of Purchasing Management-Chicago's business activity index plummeted in March to 62.5 from 69.2.
Conversely, a government report confirmed that the U.S. economy had become exceedingly sluggish in the first quarter of 2005, what with its annual growth stooping to 3.1 % from the 2004’s fourth quarter rate of 3.8 percent. Xinyi Lu, chief strategist in Tokyo at UFJ Bank Ltd., remarked, “We've seen a series of weak data out of the U.S. That's weighing on the dollar which could fall to $1.3070 per euro and 104.80 yen next week.”
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