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March 6, 2006    

Yen falls, US dollar strengthens

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by Elaine Frei

Yen falls, US dollar strengthens

Several factors combined on Monday to cause the Japanese yen to decline in value even though some analysts expect the Bank of Japan to begin tightening its monetary policy as soon as this week, although most expect that any move will not come until April. Those factors included data showing that short yen position had fallen sharply, negative mergers and acquisitions flows, and comments by Japanese prime minister Junichiro Koizumi that deflation had not necessarily ended in Japan and that the Bank should take their decision about any change in monetary policy carefully.

The yen dropped 0.9 percent to ¥117.41 in relation to the US dollar, lost 0.6 percent to ¥140.98 against the euro, and was down 0.6 percent versus sterling, to ¥205.32.

The US dollar saw gains on the day after new US factory order data was down on weak aircraft orders but still did better than had been expected. The greenback gained 0.3 percent to $1.2007 versus the euro, added 0.3 percent against sterling to $1.7499, and was up 0.4 percent to $C$1.1386 against the Canadian dollar.

In other currencies, the New Zealand dollar lost 1.3 percent versus the US dollar to $0.6566, while the South African rand dropped 0.7 percent to R6.2273 versus the greenback. The Norwegian krone was up 0.3 percent to NKr7.9763 versus the euro on an unexpected drop in unemployment in December, to 4.2 percent, which buoyed expectations that Norway’s central bank will raise interest rates to 2.5 percent when it meets next week.

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