reason for $us drop

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    TOKYO -- The dollar fell almost a cent against the euro and dropped
    versus the yen on a report that South Korea's central bank will
    diversify its currency reserves.

    The central bank, which has $200 billion in reserves,
    will "diversify the currencies in which it invests," Reuters said
    yesterday, citing a Bank of Korea spokesman in a parliamentary
    report. Byun Jai Yung, head of the bank's planning department, told
    Bloomberg in a telephone interview that he can't comment.

    "People are taking the Bank of Korea story a bit more seriously and
    there's some talk other central banks are backing away as well,"
    said David Mozina, a currency strategist at ABN Amro Holding NV in
    Sydney. The dollar's decline triggered some automatic orders to sell
    the currency, he said.

    The dollar fell against the euro to $1.3148 at 1:42 p.m. in Tokyo
    from $1.3068 late yesterday in Toronto, according to EBS, an
    electronic foreign-exchange dealing system. The dollar fell to
    104.91 yen from 105.54. U.S. markets were closed yesterday for a
    national holiday.

    "Korea is one the largest holders of foreign exchange reserves in
    the world, which means they will be able to buy more non-dollar
    currencies," said Greg Gibbs, a Sydney-based senior currency
    strategist at RBC Capital Markets. South Korea has the world's
    fourth-largest reserves behind Japan, China, and Taiwan, according
    to data compiled by Bloomberg.

    The yen's gain accelerated as it breached 105.40 per dollar and
    137.65 per euro, where pre-set orders to buy the Japanese currency
    were clustered, said Tsutomu Soma, a currency and derivatives trader
    in Tokyo at Okasan Securities Co.

    The dollar's slide against the euro quickened after $1.31, where
    investors placed similar orders, said Jake Moore, a strategist at
    Barclays Capital in Tokyo.

    "The sheer size of Korea's reserves makes it unignorable," said
    Tetsu Aikawa, currency sales manager in Tokyo at UFJ Bank Ltd., a
    unit of Japan's fourth-largest lender. "That revives the memory in
    people's minds how badly the dollar was sold when Russia said it was
    diversifying." The U.S. currency may weaken to $1.32 per euro today,
    he said.

    The dollar fell to a then record against the euro on Nov. 23 after
    Russia's central bank said it may increase the amount of euros in
    its reserves. The dollar fell as much as half a percent against the
    euro on Jan. 24, after a survey sponsored by Royal Bank of Scotland
    Plc showed central banks boosted euro holdings.

    Almost 70 percent of the 56 central banks surveyed said they
    increased exposure to the 12-nation currency, according to the
    survey conducted by Central Banking Publications Ltd., a London-
    based publisher, between September and December 2004. Fifty-two
    percent said they reduced exposure to the dollar.

    The yen's advance began earlier today on speculation Japan's economy
    will recover from its fourth recession since 1991. The U.S. currency
    also weakened versus the euro.

    Traders may renew bets on the yen after it retreated 3 percent from
    a five-year high of 101.69 on Jan. 17, said Sabrina Jacobs, a
    currency strategist at Dresdner Kleinwort Wasserstein. Japan's trade
    surplus widened for a second month in January, a government report
    tomorrow may show.

    "Investors are increasingly realizing that the second-half recession
    in 2004 was the low point in Japan and that it's most likely getting
    better," said Singapore-based Jacobs. "That's helping the yen."

    Japan's surplus probably grew to 508.5 billion yen ($4.84 billion)
    from a year earlier, according to the median forecast of 24
    economists surveyed by Bloomberg. The Ministry of Finance is
    scheduled to release the report at 8:50 a.m. tomorrow in Tokyo.

    "We're looking for some signs of improvement in Japanese exports,"
    said Tomoko Fujii, a Tokyo-based foreign-exchange strategist at
    Citigroup Inc. A rising surplus "will place upward pressure on the

    Finance Minister Sadakazu Tanigaki said on Feb. 20 Japan's economy
    will "improve in the latter half of this year." Growth shrank at an
    annualized pace of 0.5 percent in the three months ended Dec. 31, a
    third straight quarterly contraction
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