Japan Intervenes to Halt Yen’s Rise

Japan sold yen and bought dollars on Tuesday, less than two weeks after the country’s finance officials were a party to a statement by the Group of 7 industrialized nations that appeared to oppose currency intervention.

The Ministry of Finance took the unusual step of announcing it had sold yen through the Federal Reserve Bank of New York.

The move had the desired effect: The dollar surged against the yen.

The dollar closed at 111.42 yen in New York after falling to a three-year low of 110.12. It was at 110.91 Monday.

The greenback still closed lower against the euro and many other rival currencies, smarting from weaker-than-expected U.S. economic data reported early in the day.

The euro jumped to $1.165 from $1.159 on Monday.

Japanese officials are concerned the recently rising yen could hurt the nation’s economy by making its exports more expensive abroad. The yen has strengthened from 120 per dollar in early August.

The Ministry of Finance “seems to want to stop the bloodbath” and “manage the speed” of the yen’s rise, said Jeremy Fand, currency trader at WestLB in New York.

“It appears that the 110 level in the yen is a level that seems to get the attention” of Japanese officials, said Michael McGuinness, senior director of foreign exchange in New York at American Express Bank. “It looks like that will be our near-term bottom.”

But Japan’s intervention appears to contradict the Sept. 20 announcement by the G-7 nations -- the United States, Canada, France, Germany, Italy, Britain and Japan -- that the group endorsed more “flexibility” in exchange rates.

That was viewed as a victory for the Bush administration, which is widely believed to want a weaker dollar to help U.S. exporters.

The G-7 asked for flexibility, but “it didn’t say free float,” said Michael Rosenberg, head of currency research at Deutsche Bank.

In other currency-related news, Treasury Secretary John W. Snow told U.S. senators last month that he wanted China to adopt a more flexible exchange rate immediately, according to a Sept. 12 letter to lawmakers obtained by Bloomberg News.

Snow said he wanted China to change its currency policy “now” and pledged to continue his lobbying of China and his stance that government interference in currency markets should be kept to a minimum.

The Bush administration, pressured by U.S. manufacturers, wants China to end an eight-year policy of pegging the yuan at about 8.3 to the dollar, and instead let it rise.

China’s fixed-rate policy has held down the price of its exports at the expense of companies in the U.S. and elsewhere, critics maintain.