Dollar Hits Four-Month Yen Low as Obama Warns on Debt

TOKYO, KOMPAS.com - The dollar hit a fresh four-month low versus the yen in Asia trade Tuesday as a standoff over competing US plans to raise the debt limit intensified, heightening fears of an unprecedented default.

The dollar fell to 77.89 yen at 0158 GMT, its lowest level since March 17, after US President Barack Obama addressed the nation in a prime time TV speech in which he warned that the current debt impasse could have grave consequences.

The euro rose to $1.4434 from $1.4382 in New York Monday. The dollar fell on “disappointing” comments by President Obama, said Hideki Hayashi, global economist at Mizuho Securities.

“The speech falls short of market expectations that the President might show progress on the ongoing standoff,” he told Dow Jones Newswires.

The greenback later saw volatile trade, at one point surging to 78.70 yen before falling back to 78.25 by 0240 GMT. Dealers said the movement was due to large yen selling orders being triggered by a certain price, as opposed to any Japanese market intervention.

The dollar “has been weighed by uncertainty over the US debt ceiling talks and concern over a possible credit downgrading,” said Gen Kawabe, dealer at Chuo Mitsui Trust and Banking. Congressional Democrats and Republicans have made no substantial progress towards a unified plan to cut the deficit and raise the debt ceiling by a August 2 deadline.

The continued impasse has raised worries about a possible default, leaving investors uncertain whether the nation can keep its triple-A credit rating. President Obama warned that the Republicans’ unyielding approach to the US debt crisis was a “dangerous game” and urged Americans to press for compromise.

With a potential US default looming, Obama appealed to Americans to “make your voice heard”. The yen rose nearer to levels not seen since it reached a postwar dollar high following the March 11 earthquake and tsunami, which prompted Japan and its G7 partners to launch a coordinated intervention that month.

Japanese exporters have called for government efforts to halt the yen’s advance, but Japanese Finance Minister Yoshihiko Noda on Tuesday stopped short of hinting at an imminent currency market intervention.

“The (yen’s) movement has been one-sided largely because of overseas factors. I will continue to closely watch developments in the market today,” Noda said.

In Tokyo the Nikkei 225 index came off earlier gains to end the morning session flat.