Yen down on concerns for strength of Japanese government

Yen down on concerns for strength of Japanese government

The yen was down on Thursday on uncertainties about the future of Prime Minister Junichiro Koizumi.

Mr. Koizumi has threatened to resign and call a snap election if his proposal to privatize the Japanese post office is not passed by the upper house of parliament when it votes on the measure early next month.

The leader of the Liberal Democratic Party, Mr. Koizumia��s own party, gives the bill only a 50-50 chance of being approved. If the bill does pass, however, some analysts see a significant rally for the yen.

Analysts also saw the yen being pressured by portfolio outflows as purchases of foreign bonds by Japanese investors was a net A?1,181 billion last week, far above the A?127 billion flowing into Japana��s markets from foreign investors.

The yen lost 0.4 percent to A?136.13 in relation to the euro, dropped 0.6 percent to A?197.05 against sterling, but held steady at A?112.33 in relation to the US dollar, which was having its own problems.

The greenback lost 0.6 percent to $1.7546 in relation to sterling and declined by 0.5 percent to $1.2121 against the euro. The euro was helped by strong money supply figures.

Sterling benefited by a positive report on the currency by Goldman Sachs, which said that it believes UK interest rates will fall to 4.25 percent by November but will go up again in the second half of 2006.

Meanwhile, the Chinese renminbi had its strongest close since last weeka��s revaluation, rising to Rmb8.1080 to the dollar.

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