Yen weaker against dollar after G7 pact

Tuesday, 22 March 2011 00:01 - - {{hitsCtrl.values.hits}}

SINGAPORE (AFP) - The yen fell against the dollar in Asia trade Monday after Japan and its fellow G7 partners vowed last week to halt the currency’s rise with a joint intervention, analysts said.

In afternoon trade, the dollar rose to 80.95 yen from 80.59 yen in late US trade Friday. Markets in Japan are closed for a public holiday and will reopen Tuesday.

The euro changed hands at $1.4162, down from $1.4176 late Friday, while the euro was at 114.65 yen compared with 114.91.

“The focus this week will obviously remain on the consequences of the earthquake (in Japan) and the responses of the markets, particularly currencies,” said analysts from Capital Economics research.

World Bank chief regional economist Vikram Nehru said the yen, which shot to post-war highs against the US dollar after the disasters, was expected to normalise after the pledge by G7 members.

“The expectation is that this strengthening of the yen was relatively temporary,” Nehru told reporters in Singapore.

“We suspect that with the injection of liquidity now by the Japanese authorities, together with a slowdown in net inflow, the yen will once again go back to its normal levels overtime.”Capital Economics said Friday’s statement by the G7 that they would step into currency markets meant the yen “will be significantly weaker in a few months’ time”.

But the intervention is unlikely to be sufficient enough to help Japan rebuild its economy, which has been hammered by the March 11 earthquake and tsunami, the London-based research house said.

“What’s more, the fact that the action is coordinated is more psychological than real,” it added.

The yen soared after the massive earthquake and tsunami slammed into Japan’s northeastern region with the currency hitting a post World War II peak of 76.52 against the greenback on Thursday.

Tokyo is also battling to avert a meltdown at an plant that was crippled by the natural disaster, Japan’s worst in nearly a century.

Against other Asian units, the dollar fell to Sg$1.2691 from Sg$1.2735 on Friday, to 8,740 Indonesian rupiah from 8,770, to 43.56 Philippine pesos from 43.72 and to 1,124.8 South Korean won from 1,126.75.

It also weakened to Tw$29.57 Taiwan dollars from Tw$29.59 and to 30.29 Thai baht from 30.34.