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THE WALL STREET JOURNAL: Dollar Plummets Against Yen: suspicions… latest attempt by central banks to save sliding U.S. economy won’t work.

By TAKASHI NAKAMICHI
March 13, 2008 4:18 a.m.

TOKYO — The dollar plummeted to near ¥100 and hit record lows versus the euro and the Swiss franc in Asia Thursday, as suspicions grew that the latest attempt by central banks to save the sliding U.S. economy won’t work.

Market participants ranging from hedge funds to bankers to Japanese exporters sold the dollar for yen, sending it down almost ¥2 to ¥100.02 on the EBS trading platform, traders said. That was the lowest level since ¥99.94 on Nov. 10, 1995.

The dollar also sank to all-time lows of $1.5587 per euro and 1.0090 versus the Swiss Franc. Against the British pound, the U.S. currency fell to $2.0321 — the lowest since Dec. 14, 2007.

The dollar fell so quickly that Japan’s finance minister and his top subordinate warned the markets against causing “excessive” moves in the dollar-yen rate — a language that indicates they are increasingly concerned about the rising yen damaging Japan’s slowing economy.

But traders showed little reaction, betting Japan won’t intervene to sell the yen anytime soon. “The dollar’s target is at ¥100” versus the yen amid mounting worries over a possible U.S. recession, said Satoshi Okagawa, head of foreign exchange forward trading group at Sumitomo Mitsui Banking Corp.

“With U.S. interest rates, stock prices and [the dollar’s] exchange rates all falling, investors are asking themselves whether they should keep their money in U.S. assets. … I think a drop to as much as ¥95 is possible. [The current pace of the dollar’s fall] is really fast. People just can’t catch up with it.”

The euro is likely to reach $1.5600, he said. If it tops that level, the next target would be $1.5700.

Elation over the attempt by central banks Tuesday — led by the U.S. Federal Reserve — to pump extra cash into distressed U.S. credit markets, has given way to pessimism that the move isn’t enough to rejuvenate lending activities or prevent a U.S. recession. Asian stock markets dived Thursday, with Tokyo’s benchmark Nikkei 225 Stock Average index down 3.4% in late trading. (See related article.)

If U.S. February retail sales data to be released later in the day prove worse than economists expect, the dollar could take another beating, traders said. Retail sales likely rose 0.1% on month after a 0.3% gain in January, say economists polled by Dow Jones Newswires

With the overall markets unstable and the yen surging, Japan’s currency authorities voiced displeasure. “It’s also a shared perception among the [Group of Seven leading industrialized nations] that excessive exchange-rate moves are undesirable,” Finance Minister Fukushiro Nukaga told reporters.

The same line of warnings was also made by Naoyuki Shinohara, vice finance minister for international affairs. Their latest comments suggest they are getting more uneasy. Over recent weeks, Messrs. Nukaga and Shinohara never went beyond repeating they were watching the currency markets carefully.

But their “verbal intervention” met indifference from traders, who are too focused on pushing the dollar below ¥100.00 to “hear any noises,” one Tokyo trader said.

“At a time when the U.S. is suffering [from its housing-market crisis], Japan probably would get itself into trouble if it intervenes” to hoist the dollar for Japanese exporters and against U.S. manufacturers, said Seiichiro Muta, director of foreign exchange at UBS. “If Tokyo ever intervenes, it may be when the dollar nears ¥90 and Japanese industries start asking the government to do something about it.”

Write to Takashi Nakamichi at [email protected]

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