Economists unsure if more dollar weakness is in the cards For Asian exporters struggling to contend with falling demand, the U.S. Federal Reserve's strategy to drive down lending rates to fight a recession in the world's largest economy may well sound like music. But they will still have to contend with the prospect of a further impact on their businesses that a U.S. dollar weakness versus local currencies might bring along. The negative impact was playing on investors' minds in Thursday's trading, when shares of Japanese and South Korean exporters declined, dragging down the broad markets after a strong start. "For the wider market, [the Fed decision] is obviously quite good, especially for the banks. But at the moment, people are focusing more on exporters," said Andrew Sullivan, a sales trader at Main First Securities. "Longer-term wise, these export driven markets are certainly going to struggle, especially if the yen remains at such a strong level." Overnight, the U.S. Fed said it would buy $300 billion in longer-term Treasury bonds and purchase an additional $750 billion of agency mortgage-backed securities to ease mortgage rates and help arrest a slide in the U.S. economy. See full story. Among Japanese export-dependent companies, shares of Sony Corp. fell 0.9%, Toyota Motor Corp. gave up 3% recently. In Seoul, shares of Hyundai Motor Co. lost 4.4%, while Posco dropped 1.4%. Regional markets were mixed in choppy trade, with Japan's Nikkei 225 Average dropping 0.6% to 7,922.89, South Korea's Kospi 0.1% lower and Hong Kong's Hang Seng Index off 0.3%. Among gainers, China's Shanghai Composite rose 0.5%, Taiwan's Taiex added 1.1% and Australia's S&P/ASX 200 climbed 0.7%. Andreas Schuster, strategist at CLSA Tokyo, estimates that a 10 yen move against the U.S. dollar influences profits of listed Japanese companies negatively to the tune of 15%. "However, as exports are falling rapidly, the yen sensitivity of the market is also declining. The bigger problem at the moment is demand -- or lack thereof -- rather than the currency," he said. In the currency markets, the U.S. dollar was recently down at 95.98 yen, compared with 98.11 yen the previous day. But despite the big overnight move in the currency exchange rate, some economists viewed the Fed moves as a positive development. "I don't think the overnight drop in the dollar will make very much of an impact on its own on Asian exporters, who are unlikely to live or die on day-to-day currency moves," said Naomi Fink, a Japan strategist at Bank of Tokyo-Mitsubishi. "[The problem facing exporters] is not the currency -- that is a symptom rather than the ailment that has served as a convenient yet facile symbol of national competitiveness. The problem is weak global demand and illiquidity in trade financing flows," Fink added. Richard Jerram, Japan economist at Macquarie Research in Tokyo, said it was possible to interpret the Fed's moves in more than one way, and it was "very simple interpretation" that an increase in dollar liquidity would impact its value. "You could also make the argument that they are increasing confidence in the U.S. economy and asset prices, which should also be increasing foreigners' willingness to own U.S. assets," said Jerram. "To me, this isn't particularly clear that [the Fed move] this is bad for the exchange rate." "The main cause of pressure (on exporters) is weakness of demand. Anything which gives you some hopes [of a recovery in demand] is a positive signal," he added.

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