Yen drops on business confidence survey

Wednesday July 01, 2009

TOKYO: The yen fell in Asian trade on Wednesday as a smaller-than-expected improvement in Japanese business confidence disappointed the market, dealers said.

The dollar rose to 96.75 yen in Tokyo morning trade from 96.30 in New York late Tuesday. The euro edged down to 1.4015 dollars from 1.4032 but firmed to 135.59 yen from 135.17.

The Bank of Japan said in its quarterly Tankan survey that business confidence among major Japanese manufacturers had improved for the first time in two-and-a-half years.

But many investors were disappointed because they had hoped for a better reading, dealers said. "The market had thought the confidence index would go up a bit higher," said Masaki Fukui, senior market economist at Mizuho Corporate Bank.

"The survey showed the business sentiment still remained cautious." The sentiment index rose to minus 48 in June from a record low of minus 58 in March. Market forecasts had been for a figure of about minus 43.

Overnight in US trade, investors had bought the dollar -- seen as a relatively safe investment -- amid jitters over the health of the economy.

The Conference Board, a business research group, said US consumer confidence fell in June as households worried about the recession and job losses.

Investors were awaiting new leads from a European Central Bank monetary policy meeting on Thursday and the release of US monthly employment data the same day.

The ECB is expected to keep interest rates at a record low of 1.0 percent despite an appeal from the Organisation for Economic Cooperation and Development to lower the main rate even further to nearly zero.

(AFP)