SE Asian central banks boost yen reserves<\/p>\n
TOKYO (Reuter): Some Asian central banks are quietly but
\nsteadily dumping U.S. dollars and German marks for the yen in
\norder to boost the Japanese currency portion of their foreign
\nexchange reserves, senior Japanese bankers say.<\/p>\n
"Southeast Asia's public investors were aggressive in yen
\npurchases when it weakened to 122-124 to the dollar. They are
\nalso placing persistent bids on the yen in crosses, particularly
\nfor the mark," said Shinichiro Maruyama, chief of spot trading at
\nthe Industrial Bank of Japan.<\/p>\n
He added that these moves reflected a portfolio reshuffle by
\nthe central banks and an enhancement of their yen weighting.<\/p>\n
"The (recent) weak recovery, if any at all, in the mark
\nagainst the yen proves that they have been quantitative, outright
\nyen buyers behind the scenes," said Takashi Okura, chief trader
\nat the First National Bank of Chicago's Tokyo branch.<\/p>\n
Okura noted that Southeast Asian central banks, along with
\nEast European central banks which need yen to pay back their yen
\nloans from Japan, were driving the well-bid Japanese unit.<\/p>\n
The move to procure yen holdings is in response to the recent
\nGroup of Seven (G-7) statement suggesting its reluctance to see a
\nfurther dollar rise, and also a perception that a subtle shift
\nhas occurred in U.S. monetary authorities' public policy toward
\nthe dollar, bankers said.<\/p>\n
In February, the Group of Seven industrialized countries of
\nJapan, the United States, Germany, Britain, France, Italy and
\nCanada said in a statement that major misalignments in exchange
\nmarkets noted in the April 1995 communique have been corrected.<\/p>\n
The dollar hit a record low of 79.75 yen in April 1995.<\/p>\n
U.S. Treasury Secretary Robert Rubin reiterated this week that
\nthe dollar had been strong for "quite some time".<\/p>\n
"Not just in the eyes of the G-7 but also from the perspective
\nof Asian central banks, a not-so-strong-a-dollar would be
\nbeneficial to the region," Taisuke Tanaka, a market strategist at
\nCredit Suisse First Boston's Tokyo branch, said.<\/p>\n
Due to the dollar's strength particularly against the yen,
\nAsian economic growth has been slowing since early 1996.<\/p>\n
This is because East and Southeast Asian currencies are
\nloosely linked to the dollar, and the higher dollar or stronger
\nlocal currencies cuts the competitiveness of their products
\nagainst Japanese goods.<\/p>\n
Japanese bankers said, however, that they doubt that those yen
\npurchases are backed by any policy coordination among Asian
\ncentral banks which together possess more than 40 percent of the
\nglobal foreign exchange reserves.<\/p>\n
They said that Southeast Asian central banks continue to
\nsteadily unload the dollar for the yen, although their activities
\nare more noticeable in cross-yen trading.<\/p>\n
In the recent weeks, persistent yen buying interest by those
\ncentral banks has often overwhelmed speculative yen sales for the
\nmark by U.S. hedge funds, traders said.<\/p>\n
In Tokyo on Monday, U.S. hedge funds tried to drive up the
\nmark to well over 71.50 yen, only to be thwarted by strong bids
\non the yen by a Southeast Asian central bank, traders said.<\/p>\n
The following day, those U.S. hedge funds turned mark sellers,
\nthey said.<\/p>\n
The mark was quoted at around 70.55 yen in late Tokyo morning
\ntrade on Friday.<\/p>",
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