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Yen remains steady despite Japanese rate raise |
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August 13, 2000
NEW YORK (AP) - The dollar held on to its recent gains against the yen Friday after Japan's central bank raised interest rates there for the first time in ten years, and the euro slumped against both the yen and the dollar on strong U.S. economic data. Putting an end to its decade-long policy, the Bank of Japan lifted the country's near zero interest rates to 0.25 percent. The historic announcement, however, had little impact on dollar-yen trading amid concerns the rate increase would reverse Japan's frail recovery, traders said. In late New York trading, the dollar was quoted at 108.69 Japanese yen, down from 108.84 yen. "The move was widely anticipated by the market and the news left the yen in a very narrow range of trading," said Brian Arabia, vice president of foreign exchange at ABN-AMRO. "The raise was certainly more of a symbolic move than an economic one." The yen is expected to trade within the 107-110 range in coming weeks, since the rate increase is too small to have an impact on the currency market, traders said. In other trading, the euro fell after the Friday release of a flat Producer Price Index and a stronger-than-expected retail sales' report provided new evidence that the U.S. economy was heading toward a soft landing, without inflationary pressures. In late New York trading, the European currency was quoted at 90.35 cents, down from 90.78 late Thursday. "This was a very favorable report for the U.S. economy because it continued to show that the economy is moving along with relatively few, if any, signs of inflation," Arabia said. "It was just so bullish for the US economy that traders immediately turned around and sold their euros." Traders said the new economic data took the fears of a seventh Federal Reserve interest rate raise away. The Fed has raised interest rates six times over the past 14 months in an effort to slow the economic growth and keep inflation in check. Fed's policy makers' next meeting is on Aug. 22. In other trading, the dollar also was quoted at 1.7200 Swiss francs, up from 1.7055, and 1.4827 Canadian dollars, up from 1.4818. The British pound rose to $1.5015 from $1.4957. Currencies of the 11 countries participating in the euro are no longer traded separately and are tied to the euro by a fixed rate. Based on Friday's euro rate, the dollar was worth 2.1648 German marks, up from 2.1547; 7.2606 French francs, up from 7.2266; and 2,143.20 Italian lire, up from 2,133.16 . |