LOOSE CHANGE

Tokai Bank of Japan has suffered a unique double whammy. Only 48 hours after the Nagoya-based bank was bombed out of its London premises came news of a downgrading of its senior rating from A1 to A2 by Moody's Investor Services, the U.S. credit ratings agency. Tokai is in good company. Sumitomo Bank and Fuji Bank have also suffered a similar fate, with downgradings from Aa3 to A1. In the past year Moody's has revised the long-term debt ratings of 11 of the top 17 Japanese banks it lists.

The Albanian government faces a new setback in its bid to restructure $500 million in foreign debt--$240 million of it in failed foreign exchange settlements. The banker hired to sort out the mess, Nicolas Arsidi, is in jail in France, facing fraud allegations. The government's losses were clocked up by the State Bank of Albania in 1991 when central bankers began a frenzied attempt to speculate on the markets, often betting much more than the $80 million the impoverished country possessed in forex reserves (FX Week, December 7).

Bank Negara governor Jaffar Hussein has surprised analysts in Malaysia by issuing a nine-page statement justifying his management of the central bank's foreign exchange reserves. For 1992 Bank Negara reported a massive M$9.3 billion fall in reserves, equivalent to $5.9 billion, and blamed on forex losses (FX Week, April 12). "As long as the global exchange rate is unstable," says Jaffar, a former partner with Price Waterhouse, "the value of forex assets will change --sometimes up, sometimes down." Jaffar says that since his appointment the bank's international reserves have jumped to M$47.2 billion from M$19.7 billion at end-1987. The governor refuses to explain the losses in detail because, he says, that would require releasing information on the bank's forex transactions, composition of reserves and forward commitments on various currencies. "In other words, showing my hand to the market," adds Jaffar.

Iran surprised the foreign exchange markets by its announcement on 13 April that its local currency --the rial --was "fully convertible." The next day there was a 6.7 percent devaluation of the floating rate against the U.S. dollar to $1=1,648 rials. The Tehran authorities, seeking popularity ahead of presidential elections next month, have told importers they can obtain all their hard currency needs at the new rate, while all others without documentation can obtain up to $5,000 (FX Week, February 15).

Credit du Nord, the retail banking unit of France's Groupe Paribas, plans to close its New York branch by June 30. It has been scaling back global activities in the U.S. for the past few years, according to the bank's senior vice president in France, Remy Villalard, to concentrate on domestic business in France. Villalard says the New York operation now has 30 employees, and the foreign exchange desk only has a few dealers. Villalard says the branch will be either relocated, reassigned to Banque Paribas or laid off. The London and Brussels branches are to remain open.

Ferrell Capital Management reports March performance of the Ferrell FX Index (a benchmark for multi-advisor currency portfolios) is down 1.2 percent, with 27 of the 30 programs in the Index reporting.

American Express Bank reported first-quarter foreign exchange trading revenues were flat, in a year-over-year comparison, at $19 million.

The Bank of Japan reported that dollar/yen turnover in Tokyo rose sharply to an average of $10.44 billion a day in the week ended April 23, from $5.80 billion in the week ended April 16. Average daily dollar/mark turnover also rose to $3.68 billion, from $3.0 billion the previous week.