Tokyo—The yen firmed against the dollar in Asia on Wednesday with market players unimpressed with Japan’s new steps to counter its currency’s rise. The dollar fetched 76.64 yen in Tokyo afternoon trading, down from 76.77 yen in morning trade and 76.68 in New York late Tuesday.
The yen, which hit its post-war high of 75.95 to the dollar last week, slightly weakened after ratings agency Moody’s Investors Service downgraded Japan’s sovereign debt rating by one notch, citing large budget deficits.
But the Japanese currency firmed back after Finance Minister Yoshihiko Noda unveiled steps to combat the yen’s rise, which threatens to undermine the recovery of companies following the March earthquake and tsunami.
The euro inched down to $1.4412 from $1.4436 while the European single unit fell to 110.49 yen from 110.69. Noda announced a $100 billion facility aimed at encouraging Japanese firms to step up merger and acquisition activity overseas and purchase natural resources.
The package also sees the Finance Ministry strengthen its monitoring of the foreign exchange markets, requiring dealers to report trading positions through to the end of September. The new measures will not have much of an impact unless Japanese firms suddenly develop a large appetite for buying up foreign firms, Credit Agricole head FX strategist Mitul Kotecha said in a research note.
Traders were also unimpressed with recent comments from Japan that it will strengthen monitoring of markets, believing instead “talk is cheap” when it comes to intervention, said Sean Callow, senior currency strategist at Westpac in Sydney. Moody’s action was the first downgrading of Japan’s sovereign debt by a major credit ratings agency since the March 11 earthquake and tsunami.
But “the market’s reaction to Moody’s downgrading is limited as the move was not a big surprise,” said Sumino Kamei, a senior analyst at the Bank of Tokyo-Mitsubishi UFJ. The ratings agency also downgraded major Japanese banks later Wednesday but the move had little impact on currency markets.—AFP
