Currency Traders Return to Strategy Of Unloading Yen, Buying European
NEW YORK -- Currency traders returned to a strategy that some say is the only clear bet they can make: buy Europe, sell Japan.</br></br>What that amounted to was the same market pattern repeated on numerous occasions in recent weeks -- the dollar falling against the mark, but rising against the yen, alongside a healthy rally in mark/yen.</br></br>Analysts said Tuesday's quarter-percentage-point cut in the U.S. Fed funds rate suggests the Federal Reserve will make additional easings before year end, a process many believe will weigh on the dollar. Lower U.S. interest rates make dollar-denominated assets less attractive.</br></br>Notwithstanding recent signs that German Chancellor-elect Gerhard Schroeder favors softer monetary policy, the Bundesbank is believed to be adamantly opposed to German rate cuts. Add to this situation some additional bad news on Japanese banks yesterday and mark/yen looked like a strong buy, traders said.</br></br>"Mark/yen has been the favorite play of the past few weeks. If [the mark] gets through the 82/83 yen level, it will look like people are really coming back to start selling yen again," said John McCarthy, vice president, foreign exchange, at ING Barings Capital Markets in New York.