U.S. currency falls near multi-year low after newspaper reports Japan will phase out intervention.
March 29, 2004: 9:14 AM EST
NEW YORK (CNN/Money) - The U.S. dollar hovered near a multi-year low versus the Japanese yen Monday after a newspaper reported that Japan had ended its campaign to weaken its currency amid strong economic signs in the export-dependent country.
The dollar bought ¥105.73, down from ¥106.17 late last week, and the euro bought $1.2121, down from $1.2142 late Friday.
The dollar dropped below ¥105.30 in early Tokyo trade, its lowest level since mid-February when it fell to a three-year low of ¥105.16 before rebounding on intervention.
Officials at both the Finance Ministry and the Bank of Japan (BOJ) said that Japan's currency policy had not changed, playing down the report and beating back the yen from the day's highs.
Still, the story on the Web site of the Times of London made dollar bulls nervous, hammering home the idea that Japan cannot rely on massive forex intervention forever and needed an exit strategy.
"I was skeptical about the article at first," Satoshi Tokuda, forex manager at Sumitomo Corp., told Reuters. "But then I started to think it might be true. They might not stop intervention suddenly, but they may scale it back gradually.
The report, which quoted BOJ officials but not the Finance Ministry which directs intervention, said that Japanese officials think that intervention is no longer necessary because the country's economic recovery is gaining strength.
But Finance Ministry officials reiterated Monday that Tokyo would continue to intervene if needed.
"It is a speculative article. There is no change in our policy," said Finance Minister Sadakazu Tanigaki.
A BOJ spokesman also said it could not confirm the Times report, saying the central bank was not in a position to comment on currency policy.
Japan has sold more than ¥30 trillion, or $285 billion, in currency intervention since early 2003 to curb the yen's strength, which could harm Japanese exporters.
U.S. Treasury prices also fell Monday as Japan often buys bonds when it intervenes to prop up the dollar.
The benchmark 10-year note fell 1/4 of a point to 101-3/32 to yield 3.86 percent, up from 3.83 percent late Friday, and the 30-year bond shed 13/32 to 108-25/32 to yield 4.79 percent, up from 4.76 percent late last week.
The two-year note dropped 1/32 to 99-25/32 to yield 1.60 percent and the five-year fell 3/16 of a point to 99-2/32 with a yield of 2.82 percent.
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