Financial Post Articles

US$ rises as G7 said unlikely to take action

Financial Post, Daily edition, Tuesday, February 4, 1997

The US$ rose yesterday after Japanese Prime Minister Ryutaro Hashimoto suggested the world's leading nations won't join to weaken it. His remarks countered speculation that central bankers and finance ministers from the Group of Seven countries would oppose further gains by the US$ when they meet in Berlin on Feb. 8.

``They aren't talking about a concerted effort to hold the US$ back,'' said Rick Zauderer, chief currency trader at Friedberg Commodity Management of Toronto. That's ``negative for the yen.'' Friedberg earned a 76.2% gain on its currency holdings last year.

The US$ rose to a 47-month high of 122.76 yen and a 31- month high of 1.6567 German marks last week. Yesterday, the US$ closed at 121.75 yen in New York, up from 121.30 yen at Friday's close, and to 1.6390 marks from 1.6375 marks.

Zauderer said he is holding on to US$s he bought for yen at the beginning of the year. ``I still feel the yen has room to go down.'' Friedberg's performance last year topped Ferrell Capital Management's ranking of 36 currency funds.

Traders bought US$s yesterday after Hashimoto said in a Japanese budget committee meeting that Japan shouldn't expect other nations to help push the US$ down.

The G7's support for a stronger US$ helped lift the currency from post-Second World War lows against the mark and yen in early 1995, and now traders are looking for signs the world's most powerful nations are backing away from that stance.

The group often expresses its views in a statement at the end of the talks. After the last meeting in September, U.S. Treasury Secretary Robert Rubin said the nations ``are committed to a strong US$.''

The US$ pared its gains after investor George Soros said at the World Economic Forum in Davos, Switzerland, that the G-7 may object to the pace of the US$'s rise at their meeting this weekend.

While officials might approve of the US$'s current level, ``they [might] disapprove of the rate of change,'' said Soros, who earned renown and more than US$1 billion selling the British pound in 1992. The US$ is up 5% versus the yen and 6.4% against the mark so far this year.

``Soros still has a little bit of influence in the currency market,'' Zauderer said.

The British pound rose after two strong British economic reports. It closed at US$1.6209, down from US$1.6023 Friday. The US$ slipped to 1.4181 Swiss francs from 1.4225 francs and rose to 5.5415 French francs from 5.5315 francs.

The C$ closed higher, reaching US74.39 cents from last Friday's US74.24 cents. The US$ fell to $1.3443 from $1.3470.

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