Greenback falls below 97 yen for first time since '95
HONG KONG (MarketWatch) -- The U.S. dollar fell below 97 yen in early Tokyo trading Monday, its lowest level in 12 1/2 years, after the Federal Reserve lowered the discount rate by a quarter percentage point to 3.25%.
The dollar was changing hands at 97.06 yen at 10:49 a.m. in Tokyo, rebounding from its session low of 96.59 yen, its weakest level against the Japanese currency since Aug. 1995. The dollar fetched 99.14 yen in late New York trading Friday, and 100.27 yen in late Tokyo trading Friday.
"The market's gone crazy, there's no liquidity," said Haruya Ida, an economist with Thomson Financial in Tokyo.
Gold futures also extended gains against the dollar, with the front-month bullion contract touching a record $1,025.20 an ounce in electronic trading before easing back to $1.024.4 an ounce, a gain of $24.90 from its close on the New York Mercantile Exchange.
Japan's Finance Minister Fukushiro Nukaga expressed concern over the rapid appreciation of the yen, indicating the government was growing increasingly worried about the impact the stronger currency would have on the Japanese economy.
"I feel that recent movements in foreign exchange rates are excessive, and I'm concerned about it," news wires cited Nukaga as saying during a press conference Monday.
Analysts said the yen's rapid rise could spur the Bank of Japan into action in the foreign currency markets.
"The possibility of intervention has moved up and that might put a little bit of support back into the dollar yen market," Ida said. "But the way things are going we could see the 95-yen level very soon."
Acting to prevent a run on major global financial firms, the Federal Reserve cut its discount rate by a quarter percentage point to 3.25% and offered to lend money to a longer list of firms than ever before. See full story.
The extraordinary weekend moves came as J.P. Morgan Chase (JPM: 36.54,-1.57-4.12%) sealed a deal to buy Bear Stearns Cos. (BSC: 30.00, -27.00, -47.4%) for just $2 a share backed by up to $30 billion borrowed from the Fed. The Fed board gave its approval to that unique funding arrangement, which guarantees JP Morgan against losses from buying Bear. See full story.
Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.
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