Dollar weakens against yen in Asian trading on U.S. subprime worries
Jakarta Post, Indonesia
TOKYO (AP): Worries over fallout from the intensifying U.S. mortgage crisis dominated the Asian currency markets Friday, pushing the dollar lower against the yen, and prompting traders to anticipate more losses in the greenback.
The U.S. dollar was trading at 118.06 yen late afternoon, down from 118.29 yen late Thursday in New York.
Selling by U.S., European and Japanese short-term speculators pushed the dollar down, traders said.
The American currency has pared earlier losses versus its major rivals on speculators’ position adjustments. But traders said it remained vulnerable – against the yen in particular – as global investors are trying to shrink risk positions, including so-called yen-carry trades, to protect themselves from the fallout from U.S. subprime mortgage problems.
“Uncertainty” is driving investors to pull out of risky investments, said Masashi Kurabe, senior foreign exchange manager at the Bank of Tokyo-Mitsubishi UFJ.
For the currency markets, subprime problems are “like a powerful virus – people are concerned and uncertain over how serious a contagion it may bring on,” Kurabe said. “Up to this point, only those who aren’t physically strong have fallen victim to it. But now there are worries that the virus may spread to harm those who are healthy.”
Investor anxiety strengthened overnight after Paribas, France’s largest publicly traded bank, said it had temporarily frozen three of its asset-backed securities funds because of losses related to U.S. housing loans.
The news served as fresh evidence that rising defaults in U.S. subprime mortgages are having a far wider impact than initially thought, sending U.S. and European stocks tumbling overnight. The yen also jumped as investors slashed yen-carry trades, a risky scheme to exploit Japan’s low interest rates. The U.S. and European central banks injected cash into money markets to hold interest rates down.
Friday, the Japanese stock market took a beating as expected. Unwinding of yen-carry trades also continued, pulling the Japanese unit higher versus the euro, sterling and the Australian and New Zealand currencies. The focus in the near-term is on overseas stock markets.
Against other regional currencies, the dollar was mostly higher, rising to 45.680 Philippine peso from 45.22, and to 930.8 South Korea won from 922.9. (**)