south korea:"don't worry, we're not selling $us"

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    South Korea Says It Will Diversify
    Reserves Without Dumping Dollars


    From Reuters
    Tuesday, February 23, 2005


    http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=7706714


    TOKYO -- The dollar rebounded against the euro and the yen on
    Wednesday after South Korea signaled that plans to diversify its
    foreign exchange reserves were not new and did not mean it would
    sell the U.S. currency. The dollar posted its biggest daily fall in
    two months against major currencies on Tuesday as the market seized
    on reports that South Korea's central bank planned to spread its
    reserves, the world's fourth largest, among a greater variety of
    currencies.


    Dealers said that the dollar's buy-back against the yen was also
    sparked by data that showed a big slowdown in Japanese exports in
    January, suggesting Japan's economy was struggling to recovery after
    falling into recession for much of 2004.


    "Given the magnitude of the dollar's fall yesterday, there's a
    potential for a rebound as South Korea makes it clear that it has no
    intention to dump dollars," said Hideaki Furumaya, forex manager at
    Trust and Custody Services Bank in Tokyo. "But people are still keen
    to sell into any dollar rally and this issue of reserve
    diversification is not about to go away any time soon."


    Following South Korea's original remarks on Monday, the dollar
    tumbled to multi-week lows against most major currencies, seven-year
    lows versus the Korean won and 22-year lows against the New Zealand
    dollar


    The U.S. dollar index, which measures its strength against a basket
    of major currencies including the euro and the yen, fell 1.4 percent
    on Tuesday in its biggest tumble since late December.


    The dollar bought 104.45 yen as of 8:07 p.m. EST, up around 0.4
    percent on the day and recovering from a 1.5 percent fall on
    Tuesday.


    The euro traded at around 138.40 yen, also up around 0.4 percent on
    the day. It fetched $1.3250 compared with $1.3259 in late U.S.
    trade.


    The yen's fall came after data that showed Japan's trade surplus in
    January fell 59.9 percent from the same month a year earlier to
    200.8 billion yen, below a median market forecast of 507.9 billion
    yen.


    Later on Wednesday, markets will focus on U.S. consumer prices in
    January, as well as the release of minutes of the Federal Reserve's
    rate setting meeting on Feb. 1-2.


    * * *


    Japan Denies Switch of Dollars to Euros


    From Reuters
    Wednesday, February 23, 2005


    http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=7707131


    TOKYO -- Japan reiterated on Wednesday that it has no plan to divert
    its massive foreign currency reserves out of dollars and into euros.


    "We have no plan to change the composition of currency holdings in
    the foreign reserves and we are not thinking about expanding our
    euro holdings," Masatsugu Asakawa, director of the foreign exchange
    market division at the Ministry of Finance (MOF), told Reuters.


    The dollar fell to multi-week lows against most other major
    currencies after South Korea's central bank said on Monday it would
    diversify its foreign exchange reserves, Asia's fourth-largest, away
    from government bonds into high yielding paper and a greater variety
    of currencies.


    But the dollar rebounded against the euro and the yen on Wednesday
    after South Korea signalled that plans to diversify its foreign
    exchange reserves were not new and did not mean it would sell the
    U.S. currency.


    Japan does not give a breakdown of the currencies in its foreign
    reserves, which were the world's largest at $840.966 billion at the
    end of January.


    But given Japan's massive currency market intervention in the past,
    in which it sold yen for dollars, the reserves are believed to be
    predominantly in dollars.


    The ministry has repeatedly said it will not diversify the reserves
    out of dollars into other currencies, such as euros, since such
    action could precipitate a further fall in the dollar.


    Finance Minister Sadakazu Tanigaki told Reuters in an interview
    earlier this month that Japan will be careful how it manages its
    foreign exchange reserves due to the potential impact on financial
    markets.


    Tanigaki said the basic principle is that the reserves should be
    stable and liquid.

 
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