New York dive hits US dollar

PUBLISHED : Thursday, 06 August, 1998, 12:00am
UPDATED : Thursday, 06 August, 1998, 12:00am

The US dollar fell for a second day against the yen yesterday as a slump in US stocks sapped demand for the US currency, dealers said.

It was also undermined by expectations Japanese tax cuts planned by Prime Minister Keizo Obuchi for next year would amount to about seven trillion yen (about HK$374.12 billion) according to members of the ruling Liberal Democratic Party.

'The weakness of the [US] stock market is very reflective of the overall problems in Asia, and that has helped exert some push and pull on the dollar,' Salomon Smith Barney currency analyst Lisa Finstrom said.

The dollar fell to 143.61 yen yesterday, its lowest this week, from 144.75 late on Tuesday. It climbed back to 144.4 in early US trading.

'The risk is that the weakness of the Dow could continue, undermining the dollar, strengthening the yen, as we see further Dow losses,' a trader at a US bank said.

Currency economists said the sudden and sharp fall in US stocks was due to a rising fear that the growth in the US economy could be stalled by a deflationary wave from the turmoil in Japan and the rest of Asia.