The dollar temporarily rose against the yen Monday after U.S. President George W. Bush confused currency markets by saying he had talked about "devaluation" with Prime Minister Junichiro Koizumi.
The dollar temporarily climbed to 132.80 yen around 2:30 p.m. shortly after Bush said at a news conference he discussed "the devaluation issue" with Koizumi.
This left players with the impression that the U.S. may tolerate a much weaker yen, dealers said. But the dollar slipped back to around 132.60 yen after traders came to understand that Bush had meant "deflation."
The White House later confirmed that Bush meant to say deflation.
He mentioned the word when he was asked about which area Koizumi should give priority to in his reform efforts.
He answered that Koizumi placed emphasis on nonperforming loans, devaluation and regulatory reform in their private discussions in the morning.
"Foreign speculators were quick to respond to Mr. Bush's 'devaluation' remark by launching a yen-selling spree," said Hitoshi Imamura, foreign exchange manager at Aozora Bank.