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The conspiracy against gold I

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    Intervention pushes dollar back above ¥120
    By Jennifer Hughes in London
    Published: June 28 2002 10:02 | Last Updated: June 28 2002 15:59

    The dollar jumped sharply against the yen on Friday and recovered somewhat against the euro after Japan's finance ministry confirmed it had asked other central banks to intervene on its behalf to help weaken the Japanese currency.

    The ECB confirmed it had acted on the Bank of Japan's behalf but the Federal Reserve refused to comment.

    The action came in London afternoon trading and analysts said the move was carefully planned.

    "This was good timing - they waited until US traders were in and the US data were out of the way, but made the move ahead of the 4pm fixing point when funds will close their books for the quarter," said Chris Furness, senior currencies strategist at 4Cast, the economic consultancy.

    It was the first time in the current cycle of BoJ intervention that Japan has asked other banks to act as its agent. Both the ECB and the Federal Reserve were involved in the BoJ's interventions last September.

    The move was Japan's seventh bout of intervention in the last five weeks and helped lift the dollar off nine-month lows against the yen at ¥118.36. The US currency rose to ¥120.36, before easing to ¥119.65 by midsession in New York.

    The news also dragged the euro lower against the dollar. The single currency stood at $0.9897 by midsession in New York after coming close to parity at $0.9990 earlier. The dollar had slipped after US copier giant Xerox restated its earnings and revised down its income for the period between 1997 and 2001.

    "It was a case of corporate governance fears all over again," said Kamal Sharma, currencies strategist at Commerzbank. "Xerox is just the latest news to rattle the market." Profit-taking then lifted the dollar as fund managers squared books on Friday as both the month and the quarter ended.

    While analysts say the pace of the dollar's fall could lead to further profit-taking, few are in doubt it will yet fall to parity with the euro.

    Some warn that profit-taking on euro gains could intensify in the short-term if stop-loss orders - said to be set around $0.9775 - are triggered as the dollar recovers.

    But with the US quarterly earnings season looming, investors are braced for further bad corporate news and sentiment towards US assets remains weak.

    "Markets are volatile and traditionally that gives investors a home bias," said Marc Chandler, currencies strategist at HSBC in New York. "In textbook style, that means the US, with its deficit, is going to be vulnerable."

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