The dollar rose for a fifth straight
day against the Japanese yen Friday and reached its best level
yet against the seven-week-old euro as the U.S. economy
continued to comfortably outperform the rest of the world.
Japanese officials remained indifferent to the yen's
week-long slump of more than 6 percent, encouraging currency
traders to continue selling the yen against the dollar.
Germany reported economic growth contracted 0.4 percent in
the fourth quarter of 1998 and the Ifo institute said its West
German business climate index fell in January. Meanwhile, France
reported its industrial output fell in December.
Stagnation in Europe has prompted growing calls from
European politicians to lower official interest rates, which
could hurt the euro by reducing returns on investments priced in
euros.
By contrast, economists Friday were raising their estimates
for U.S. growth in the fourth quarter after the Commerce
Department reported the December trade deficit was far smaller
than expected and the Labor Department said consumer inflation
remained well under control in January.
"The economists have been predicting divergences in growth
and we are seeing it. The euro slide is continuing slowly and
steadily," said Seth Garrett, head of global spot trading at
Credit Suisse First Boston.
Overnight in Tokyo, the head of Japan's Economic Planning
Agency, Taichi Sakaiya, said a dollar/yen rate of about 120 was
appropriate. That comment was the latest of several this week
that effectively endorsed the yen's sharp recent slide.
"It was a very aggressive day for the dollar. The question
is where do we go from here? The Japanese have said 120 is okay.
Does that mean 125 is okay?" said Hillel Waxman, chief currency
dealer at Bank Leumi Trust Co. of New York.
Central bankers and finance officials from the United States
and Japan will join their counterparts from Britain, Canada,
France, Germany and Italy for a summit in Bonn this weekend.
Many currency market pros expect the group — known
collectively as the Group of Seven — will issue a joint policy
statement on dollar/yen rates, perhaps sanctioning further yen
weakness.
"The dollar is pushing up on the perception that Japan's
economy is still sick. The focus is on the economic weakness in
Europe and Japan," Waxman said.
The dollar late Friday had risen to 121.12 yen, its highest
level since December 2, 1998, versus 119.77 yen late Thursday.
The euro got as low as $1.1056 before finishing at $1.1067, down
from $1.1192 late Thursday.
The greenback rose to 1.4450 Swiss francs from 1.4293 Swiss
francs and rose to Canadian $1.4865 from C$1.4860. The British
pound fell to $1.6230 from $1.6350.
