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Dollar, Stocks Open New Year With Gusto

January 4, 1996

TOKYO (AP) _ Japanese financial markets rang in the new year with gusto today, hoisting the dollar above the 105-yen level and racheting stock prices nearly 4 percent higher.

The sharp gains in the dollar were welcome news for stock investors, who responded by boosting the Nikkei Stock Average 3.77 percent, or 749.85 points, to 20,618.00 points _ a 16-month high.

A weaker yen is good news for Japanese exporting companies, whose earnings take a beating when the yen is higher against other currencies.

The dollar was trading at 105.26 yen late today, a sharp gain of 2.36 yen from its previous level in Tokyo Friday. It was also above its overnight close in New York of 104.87 yen.

Trades ranged between 104.60 yen and 105.68 yen _ the highest level for the dollar since April 1994.

Due to the abbreviated holiday schedule, stocks and bonds traded only in the morning session today. Japanese financial markets had been closed earlier in the week for national New Year holidays.

Hopes that the U.S. budget impasse will soon be broken as well as historically low interest rates in Japan have been prompting investors to dump yen and buy dollars and other currencies.

But some currency analysts cautioned that the sharp dollar gains may not continue for long, and that with so many investors taking long positions in dollars a correction could come soon.

``People are getting a little too dollar bullish,″ said Junichi Kodama, head of corporate sales for Chemical Bank. ``Long-dollar positions are becoming extreme.″

In the meantime, however, the stronger dollar was the catalyst that Japanese investors were looking for to push stock prices higher. Stronger Nikkei futures prices on the Chicago Mercantile Exchange also triggered heavy buying.

``It’s been all buy, buy, buy this morning,″ said Merrill Lynch stock analyst Dan O’Keefe.

Share prices shot up across the board, with advancing issues swamping retreating ones 1,010 to 95. Eighty-six issues were unchanged.

The Tokyo Stock Price Index of all issues listed on the first section was up 53.56 points, or 3.38 percent, to 1,631.06. The TOPIX had gained 5.28 points, or 0.33 percent, on the last day of 1995 dealings.

Trading was heavy for a half-day session, with volume on the first section of the Tokyo Stock Exchange reaching 434 million shares. A half-day session will often see volume of 200 million shares or less.

The Nikkei index had ended 1995 on Friday, Dec. 29, at 19,868.15 points, down 4.98 points, or 0.03 percent. Today’s close was the highest since Sept. 2, 1994.

Before today’s trading began, stock exchange employees, including women in colorful kimonos, gathered on the trading floor to bring in the new year with a traditional clapping ritual to pray for a strong market.

The benchmark No. 174 10-year Japanese government bonds were sold at 110.71 yen, down from Friday’s close at 111.78. Their yield rose to 3.040 percent from 2.990 percent.

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