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Yen calls the tune, bonds dip
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March 16, 1999: 9:16 a.m. ET
Repatriation ebbs, leaving dollar adrift; Treasury traders back off gains
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NEW YORK (CNNfn) - Barely pausing to take note of the European Commission's departure, global currency markets were instead caught up in the annual migration to yen Tuesday, sending the dollar slightly lower against the Japanese currency.
Japanese investors customarily park their funds in yen-denominated securities beginning in late February and continuing through the April 1 fiscal new year. This year in particular, banks and other large financial institutions are under official pressure to sell off overseas securities in order to clean up their books before they can become eligible for public funds.
By 9:00 a.m. ET, the flight of Japanese capital back home had reached a temporary ebb, leaving the dollar only minimally lower at 117.76 yen, off both its previous New York close of 117.80 yen and its overnight high of 118.49.
Currency traders noted that growing confidence in the Japanese economy also was at work in the yen's recent show of strength. Overseas investors now see the rewards in the Tokyo stock market outweighing the risks, and are wading back into undervalued Japanese blue chips.
Bank of Japan Governor Masaru Hayami confirmed that this newfound bargain-hunting urge is helping the yen, but declined to comment on what proper dollar/yen exchange levels should be.
On the other hand, the euro reacted with sublime unconcern over the surprise overnight resignation of the 20-member European Commission, the caretaker bureaucrats of the European Union.
By 9:00 a.m. ET, the European currency had regained much of the composure it had lost overnight, trading down at $1.0907 from its previous close of $1.0927. The euro had fallen as low as $1.0814 while investors adjusted to their initial shock.
Bonds higher but pensive
The Treasury market was likewise unimpressed by the morning's news, as an unexpectedly strong housing report produced lots of sound but little fury.
According to statistics released by the Commerce Department, new construction activity held steady in February at an annual rate of 1.80 million new homes. Bond traders, however, had been expecting higher mortgage rates to drive the figure down to a rate of 1.77 million.
As a result, the benchmark 30-year Treasury bond cut its morning advance in half, remaining up on the day but well off its early vigor. By 9:00 a.m. ET, a half hour after the housing release, the long bond was up 4/32 of a point in price at 96-4/32, driving the yield down to 5.51 percent.
Traders noted that activity remains light during the Japanese repatriation season, as Japanese investors are among the Treasury market's biggest players. In addition, many global investors remained on the sidelines, watching and waiting for Federal Reserve Chairman and key U.S. monetary policy guru Alan Greenspan to speak in San Francisco at 11:30 a.m. ET.
Although Greenspan is unlikely to stray far from his topic of the agricultural economy, canny investors nonetheless will scrutinize his statements for hints of interest rate policy ahead. 
-- by staff writer Robert Scott Martin
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