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Japan Intervenes to Help Support Dollar - 2001-09-17


Asian stock markets closed Monday with sharp losses on concerns about how U.S. stocks will fare as markets reopen for trade first the first time since week's terrorist attacks. Japan's government intervened in the currency markets to help support the dollar.

Japan's Finance Ministry stepped into the currency markets Monday, selling yen and buying the dollar to stop it from sliding further. It was the first time in almost a year that Japan's government undertook such action. Dealers say investors are selling the dollar on concerns over the U.S. economy and its outlook after last week's terrorist attacks on New York and Washington.

Daniel Cohen is an analyst at the research and rating agency Standard and Poor's in Singapore. "In the foreign exchange market, the Japanese government intervened to prevent the dollar from weakening further against the yen," he said. "The Japanese government bought dollars, not wanting to see the dollar weaken further and set back their own recovery prospects."

In a statement, Finance Minister Masajuro Shiokawa said Japan had moved to halt an undesirable rise in the yen. A strengthening yen raises the price of Japanese exports, such as cars and electronics, potentially damaging overseas sales.

Japan's stock market also reflected investors' fears. The Nikkei Average plunged five percent Monday to close at its lowest level since December 1983.

Exporters such as Toyota and Sony lost ground on worries over slowing sales to the United States and other countries. Sony tumbled eight percent to its lowest level in more than two years.

Mr. Cohen says that sentiment on other Asian trading floors was also poor. "It has been a very nervous market awaiting the resumption of trade in New York," he said. "The markets had already sold off in reaction to the terrorist attack."

In Hong Kong, Asia's second largest market, the Hang Seng index fell more than three percent. South Korea's KOSPI index finished with a 2.8 percent loss. Korean regulators said Monday that they would limit daily stock price movements to reduce volatility.

In Singapore, the Straits Times lost ground for the fourth consecutive session.

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