Yen weaker after early gains

| October 18, 2006 | 0 Comments

The Japanese yen made gains early against the US dollar and the euro on Wednesday after newspaper reports implied that the Bank of Japan is getting ready to increase its scrutiny of carry trades. The gains were lost later in the session, however, when the Bank denied that it would watch the trades more carefully or in any new ways. While analysts said that concern over these trades were nothing new, the report seemed to confirm that the Bank was starting to take the issue, which has to do with borrowing funds in less expensive yen then investing in higher-yielding assets abroad, more seriously.

Early in the day the yen traded at ¥118.33 versus the US dollar but it later dropped 0.4 percent to ¥119.10 to the dollar. The yen was at a three-week high of ¥148.49 against the euro but ended up 0.2 percent lower to ¥149.05 to the euro by mid-afternoon in New York.

The US dollar was stronger on the day after new data showed that new housing starts in the US were up 5.9 percent to 1.77 million in September, ahead of expectations of 1.62 million new starts. Some analysts discounted the figures as new data also showed that issuance of new building permits are at their lowest level since 2001. Still, the dollar was up by 0.2 percent against sterling, the euro, and the Swiss franc, to $1.8670, $1.2510, and Sfr1.2710 respectively.

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