By Masayuki Kitano
TOKYO, April 9 (Reuters) - The dollar fell against the yen on
Wednesday due to selling by Japanese investors, while sterling
hit a record low against the euro on expectations that the Bank
of England will cut interest rates later this week.
Earlier, the dollar briefly rose near a one-month high
against the yen, getting a lift from reports that Citigroup Inc
<C.N> was close to a sale of leveraged loans and bonds to a group
of private equity firms.
But its rise ran out of steam as Japanese exporters and life
insurers stepped in to sell the dollar, traders said.
"If the deal goes through, that would improve Citigroup's
balance sheet," said Akira Kato, senior manager for the Bank of
Tokyo-Mitsubishi UFJ's foreign exchange trading department.
"However, it is still not something that has been finalised,"
Kato said.
People familiar with the situation said on Tuesday that
Citigroup, the largest U.S. bank, was close to selling about $12
billion of leveraged loans and bonds to private equity firms
including Apollo Group, Blackstone Group LP and TPG.
Citigroup, Apollo, Blackstone and TPG declined to comment.
[]
The dollar fell 0.2 percent to 102.36 yen <JPY=>. It earlier
rose as high as 102.84 yen on electronic trading platform EBS,
nearing a one-month high of 102.95 yen struck last week.
The euro was steady at $1.5705 <EUR=>. The euro fell 0.1
percent against the yen to 160.76 yen <EURJPY=R>, retreating from
a three-month high of 161.75 yen hit on Tuesday.
The yen showed little reaction after Japan's upper house of
parliament approved acting Bank of Japan Governor Masaaki
Shirakawa as the central bank's permanent head, while voting down
the government's candidate for deputy governor, former finance
ministry official Hiroshi Watanabe.
"Even if the BOJ governor changes, it does not mean there
will be any change in Japan's foreign exchange policy," said Bank
of Tokyo-Mitsubishi UFJ's Kato, noting that the Ministry of
Finance is in charge of currency policy.
Despite some recent signs of stabilisation, concerns about
the fallout from the credit market turmoil were likely to linger
ahead of quarterly earnings announcements by U.S. banks later
this month, traders said. []
The International Monetary Fund said on Tuesday that turmoil
in credit markets could spread with losses possibly approaching
$1 trillion. []
MONETARY POLICY
Sterling dropped to a record low against the euro for a
second straight day, falling to as low as 79.94 pence <EURGBP=>
against the euro on Wednesday.
Sterling fell 0.1 percent to $1.9660 <GBP=D4>, stuck near an
intraday low of $1.9650, the lowest since late February.
The pound extended losses after Halifax, the nation's largest
mortgage lender, said on Tuesday that house prices in Britain
fell 2.5 percent in March, their sharpest monthly decline since
September 1992. []
The weak British housing data supported a market consensus
for the Bank of England to lower interest rates by 25 basis
points to 5.0 percent when its Monetary Policy Committee
announces its decision on Thursday. []
By contrast, the euro was supported against sterling and the
dollar by market expectations for the European Central Bank to
keep interest rates on hold for a while, market players said.
The ECB is seen likely to keep interest rates steady at 4.0
percent at its policy meeting on Thursday. []
The minutes of the last Federal Reserve meeting released on
Tuesday showed policy makers felt that a prolonged and severe
economic downturn cannot be ruled out, underscoring market
expectations for further Fed rate cuts. []
U.S. interest rate futures show that investors expect the Fed
to cut interest rates by at least 25 basis points from the
current 2.25 percent at a policy meeting in late April.
<FEDWATCH>.
(Additional reporting by Chikako Mogi and Takeshi Yoshiike;
Editing by Michael Watson)
