Dollar tests ¥75.95; Tokyo mulls action

The government and the Bank of Japan on Saturday began considering intervening in the market for the second time this month after the dollar briefly lost ground against the yen in New York on Friday, marking a postwar record low of ¥75.95.

The previous record was ¥76.25 set five months ago.

But market watchers are skeptical that a fresh but unilateral intervention would have a big impact on the market since the rising yen is stemming from concern over the U.S. and European economies. And coordinated intervention with U.S. and European authorities is not considered feasible.

Japan intervened in the market Aug. 4 by selling the yen and conducted additional monetary easing steps amid concern the strong yen will deal a blow to exporters struggling to recover from the March 11 quake and tsunami.

On Friday in New York, the dollar later recouped losses. At 5 p.m., it fetched ¥76.49-59, compared with ¥76.47-49 at 5 p.m. Friday in Tokyo.

Earlier remarks by Takehiko Nakao, vice finance minister for international affairs, were taken to mean Japanese authorities were hesitant to step into the market. This appeared to be behind the dollar's temporary plunge.

Nakao suggested in an interview Friday with The Wall Street Journal that while the government would take appropriate actions when necessary, it has no plans for frequent intervention.

The dollar skidded after his remarks were quoted by Reuters news agency, which said the interview encouraged yen buying.

Finance Minister Yoshihiko Noda has said Japan will take "measures in a resolute manner when necessary," hinting the possibility of a fresh intervention. But with Noda rumored to be the top candidate to run in the Democratic Party of Japan presidential race, some bureaucrats are skeptical if addressing the rising yen is Noda's main concern.

The credibility of the dollar has been challenged since the Aug. 5 historic downgrading of the AAA U.S. credit rating by Standard & Poor's.

The Group of Seven industrial economies subsequently issued a joint statement calling for a stable market, but its impact was limited as it contained no specific steps such as possible concerted market intervention.

The U.S. currency has also come under pressures since the U.S. central bank announced Aug. 9 it would maintain its effectively zero interest rate policy over an extended period. Some data released recently also pointed to a deteriorating U.S. economy.

The fiscal woes of the eurozone, triggered by the Greek debt fiasco, that have been generating concern about Europe's financial systems and economies have also prompted a fund shift to the yen, market players said.

Recent gyrations of global stock markets are also seen as encouraging buying of the yen, regarded as a relatively safe currency.

"Amid speculation that the Federal Reserve Board may convene an urgent meeting shortly, investors, factoring in the possibility of another monetary easing step, sold the dollar," a dealer said.

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