September 20, 2003	Saturday	Rajab 22, 1424

LONDON, Sept 19: The dollar plunged to a 33-month low against the yen on Friday as markets continued to test the willingness of Japanese monetary authorities to intervene to stem the trend.

The euro meanwhile took advantage of the yen movement and scored its own big gains against the greenback, trading at $1.1342 in late-day deals against $1.1256 in New York late on Thursday.

Against the yen the dollar fell to 113.95 from 115.27 on Thursday.

After a brief consolidation above the 115 level, the markets decided to sell dollars further ahead of a meeting in Dubai on Saturday of finance ministers from the Group of Seven leading industrialized countries.

Neil Mackinnon, a hedge fund economist, said the Bank of Japan had effectively given “the green light to yen bulls” by suggesting that intervention is not on the agenda ahead of the G7 meeting.

“The Bank of Japan decided the yen flows are fundamental and that it’s difficult to stand in the way,” said Mackinnon.

Divyang Shah, currency strategist at IDEAglobal, said the Japanese monetary authorities could have defended 115 if they wanted.

If Japanese authorities do not intervene on Monday, the dollar could quickly slide to 110 level, Shah added.

Tension over Japanese foreign exchange policy has mounted in the run-up to the meeting, with US Treasury Secretary John Snow urging Japan to alter its currency regime.

Earlier Bank of Japan governor Toshihiko Fukui said countries should not use tomorrow’s G7 meeting to criticise each other’s foreign exchange policies.

Asked about the soaring yen, Fukui said: “I am not in a position to comment on the yen’s rise, but we will make a response calmly, while watching the market.”

Japanese authorities fear that a rapidly rising yen will increase the price of the country’s exports and thereby reduce their competitiveness in critical overseas markets.

Bear Stearns chief currency economist Steve Barrow warned that the United States might have misjudged the situation.

“The US authorities might be aiming for a soft landing for the dollar against Asia but the ploy could easily backfire and the dollar could be at risk of crash-landing more generally,” he said.

“This would be no good for US capital markets in the long run, especially for US Treasuries,” he added.

The euro was changing hands at $1.1342 from $1.1256 late on Thursday in New York, 129.25 yen (129.74), 0.6949 pounds (0.6957) and 1.5553 Swiss francs from 1.5587.

The dollar was being quoted at 113.95 yen (115.27) and 1.3713 Swiss francs (1.3848).

The pound was at $1.6321 ($1.6179), 185.97 yen (186.49) and 2.2378 Swiss francs (2.2423).

On the London Bullion Market, the price of an ounce of gold slipped to $379.75 from $378.30 on Thursday afternoon.—AFP