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Dollar gains against yen
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October 13, 1999: 9:12 a.m. ET
U.S. currency hits 3-week high versus yen after BoJ pledge
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NEW YORK (CNNfn) - The dollar rose to a three-week high against the yen Wednesday after Japan's central bank said it will take steps to weaken its rebounding currency.
The Bank of Japan held interest rates steady but said it will take new steps to pump money into the economy in an apparent bid to curb the strength of the yen.
For now, the pledge appeared to work. Just before 9:10 a.m., the dollar rose to 107.95 yen from 106.28 Tuesday, a 1.56 percent climb in the dollar's value.
"The fact that yen weakened on the news means the market takes the Bank of Japan's pledge seriously," said Alex Beuzelin, market analyst at Ruesch International.
Most economists favor a weakening yen, which by making Japan's exports easier to sell could help the export-dependent nation recover from recession.
The dollar, however, dropped slightly against the euro. Just before 9:10 a.m. ET it cost $1.0779 to buy one euro, up from $1.0768 Tuesday, a 0.11 percent fall in the dollar's value.
Most analysts expect the euro to continue to its rise in the months ahead as Europe's economy strengthens. A Merrill Lynch survey released Tuesday confirmed this view, finding that fund managers are favoring European equities while avoiding U.S. stocks.
Bonds move higher
Treasury bonds moved higher Wednesday as investors drawn to eight-week high yields snapped up government securities. Stock market weakness also brought buyers into the relative safety of fixed-income securities.
Just before 9:10 a.m. ET, the price of the benchmark 30-year bond rose to 5/32 to 98-23/32. It yield, which moves inversely to the price, fell to 6.21 percent from 6.22 Tuesday, an eight-week high.
Weakening stock markets drew buyers to bonds. Just before 9:10 a.m. ET, S&P futures, an indication of where U.S. stocks will open, gave up 8.50 points to 1317.50. Stock markets in Asia and Europe fell Wednesday.
Still, analysts say a host of inflation-suggesting forces ahead should keep bond gains limited.
The week's most significant economic indictor, Friday's release of the September producer price index, could indicate rising inflation, which erodes the value of a bond's fixed-income payments.
The PPI is expected to climb 0.5 percent, according to economists surveyed by Reuters. More significantly, the core PPI, which excludes volatile food and energy prices, is seen gaining 0.4 percent after falling 0.1 percent the previous month.
Tony Crescenzi, bond strategist at Miller Tabak & Co., said the strong PPI, coupled with an expected 0.4 percent rise in September's Consumer Price index next Tuesday, may only increase bond market defensiveness.
"These reports will likely further douse the notion that disinflation is alive and well," Crescenzi said.
Rising commodity prices also have hurt bonds. In London, North Sea Brent crude for November delivery rose 37 cents to $22.42 after hitting a high of $20.60.
Treasury prices have fallen nearly every day since early last week, when the Federal Reserve left its main lending rate unchanged but voiced concern over rising inflation. 
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