Mar 10, 2005

Japan has Diversification Plans Too

The dollar fell to a nine-week low against the euro after Japanese Prime Minister Junichiro Koizumi said today his country ``in general'' needs to consider diversifying its foreign currency reserves, the world's largest.
Koizumi said in response to a question at parliament ``it's necessary to diversify the investment destinations'' of reserves while ``considering what's profitable and what's stable.'' The dollar pared losses after a finance ministry official said Japan has no plan to shift its $820.5 billion of reserves, comments later echoed by Finance Minister Sadakazu Tanigaki.
``The market will believe Koizumi,'' said Steve Barrow, a currency strategist in London at Bear Stearns Cos. ``This is an issue that's not going to go away'' in the foreign-exchange market. ``That's going to undermine the dollar.''
Yen is still 104.2 but that statement is big news. The Euro hit 134.56 after the news.

The FT adds this:
Elsewhere is Asia, the South Korean won jumped Won13 against the dollar to a seven-year high of Won989.2 as Korea's consumer expectations index surged to its highest level since September 2002. This prompted Seoul to spend an estimated $2bn on intervening to buy dollar and send the won spinning back to Won1,000.2.
The New Zealand dollar rallied to a fresh 22-year high of $0.7449 against the greenback as the Reserve Bank hiked New Zealand interest rates by 25 basis points to 6.75 per cent, surprising the 50 per cent of the market that had been expecting rates to be held.

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