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Yen soars, euro plunges
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November 26, 1999: 2:33 p.m. ET
Japan's currency at four-year high, but euro nears parity with dollar
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - The yen soared to a four-year high against the dollar Friday while the battered euro, down nearly 18 percent in its 11 month life span, plunged to an all-time low versus the U.S. currency.
Analysts say the yen's surge of almost 3 percent against the dollar comes as optimism over Japan's economic recovery brings a flood of overseas money into Japanese stocks, which must be purchased in local currency.
The euro weakness, in contrast, comes on growing doubts over the euro zone's economic turnaround.
Just before 1:30 p.m. ET, the dollar fell to 101.65 yen from 104.43 Thursday, a 2.68 percent surge in the yen's value.
"You have heavy foreign capital inflow onto Japanese markets," said Alex Beuzelin, market analyst at Ruesch International.
Beuzelin said the moves may be exaggerated by light trading volume in the post-Thanksgiving day trading session. Still, he said the yen's gains put pressure on Japan to weaken its resurgent currency.
Officials on both sides of the Pacific fret that a strengthening yen, because it makes exports tougher to sell, may derail the Asian nation's fragile economic recovery.
Already, dozens of Japanese companies including Nintendo Co. and Mitsubishi Motors Corp. blamed poor financial results on the strong yen's drag on export sales.
But the yen continues to rise anyway as overseas investors pour money into Japanese stocks.
The Nikkei, up substantially this year, rose 1 percent to 18,914.50, Friday; a gain of 193 points. Mutual-fund holders are among the big winners. Warburg Pincus' Japan Small Company Fund, for example, is up 264 percent year-to-date.
Euro sputters
The euro continued to falter Friday, falling to a lifetime low against the dollar.
At its lowest point Friday, the euro, down nearly 18 percent in its 11-month life span, came within less than a penny from hitting parity with the dollar. Just before 1:30 p.m. ET, it cost $1.0156 to buy one euro from $10182 Thursday, a 0.25 percent drop in the euro's value.
Analysts blame the currency's weakness on concerns of the region's financial health.
"There's strong evidence that the U.S economy is outperforming the European economy" Ruesch International's Beuzelin said.
Government data supports this view. Earlier this week, the U.S. gross domestic product, which measures all the goods, services and investment the economy generates, rose at a robust 5.5 percent annual pace in the third quarter, the Commerce Department said.
On Friday, the government said Americans' income climbed 1.3 percent in October, up from a flat reading in September and more than double forecasts.
Bonds weaken
But a string of strong data, with its suggesting of rising inflation, continues to weigh on Treasurys.
Bonds fell again Friday, pushing yields to their highest levels for the month and continuing the downward trend that began early last week after the Federal Reserve raised interest rates.
Just before 2:30 p.m. ET, the price of the benchmark 30-year bond fell 9/32 to 98-16/32. Its yield, which moves inversely to the price, rose to 6.23 percent from 6.21 percent.
Ahead, analysts predict robust increases in consumer prices, retail sales and jobs -- pushing bond yields higher and increasing the likelihood of more rate hikes.
Friday's report on October income gains only added to that fear.
"I think it does complicate the rate hike picture and the near-term interest rate outlook," said David Rosenberg, economist at Nesbitt Burns Securities. 
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