Dollar Up on Wall St. Hopes, Euro Firms
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TOKYO (Reuters) - The yen came under pressure against the dollar on Monday as dealers turned optimistic about the outlook for Wall Street and the Japanese currency was also sold against the euro as local investors bought foreign bonds.
The dollar rose above the closely watched 120 yen level for the first time since Wednesday as Japanese institutional investors bought the greenback, encouraged by recent moves in U.S. stocks.
"The dollar is firmer due to expectations that U.S. stocks will carry over the better trend from last week after a generally good outcome on U.S. earnings," said Kosuke Hanao, head of foreign exchange sales at Royal Bank of Scotland (RBS).
As of 0538 GMT, the dollar was quoted at 119.97/02 yen from 119.56/64 yen in late, holiday-thinned U.S. trade on Friday.
It had firmed to 120.07 yen earlier in the day.
Dealers took their cue during Asian trading hours from U.S. stock index futures which suggested that U.S. share prices would build on their pre-Easter holiday rally.
The Dow Jones Industrial average June futures contract added 20 points to 8,330 as of 0527 GMT and the broader Standard & Poor's 500 futures were up 3.60 points at 894.80.
But the dollar struggled to push far above the 120 yen level because of exporters' selling orders, with operators remaining unsure about the outlook for the U.S. economy after the Iraq (news - web sites) war.
"The dollar's topside is heavy because players cannot hold an optimistic view that U.S. corporate earnings will recover steadily," said a dealer at a major Japanese bank.
YEN CROSS RATES
The euro firmed as Japanese pension funds opted for foreign currency bonds since yields on Japanese government bonds offer a pittance. The euro stood at 130.63/74 yen against 130.29 yen in New York on Friday. The single currency briefly hit 130.77 yen in afternoon trade, only a hair away from a four-year high of 130.78 hit on Thursday.
"As the Iraq war is coming to an end, currency flows are driven more by interest rate differentials," said the Japanese bank dealer.
Against the dollar, the single currency rose to $1.0890/95 from $1.0871/77.
But trading in euro/dollar was subdued and most action was seen in dollar/yen and yen cross rates.
The Australian dollar was trading at levels not seen since August 1999 against the yen as pension funds invested in higher-yielding Australian bonds.
The Aussie was quoted at 73.85/95 yen against Friday's New York close of 73.51/61 yen.
CAUTION OVER DOLLAR
Although the U.S. dollar was well supported, many Tokyo traders were unconvinced that the rally would continue.
And the greenback's rise may have been exaggerated by the thin market as the Easter holiday continues in some countries.
U.S. financial markets will resume trading later on Monday but other centers, including London, reopen on Tuesday.
"We are seeing lots of bullish dollar factors, but I'm getting the impression that the dollar's topside is very much weighed down," said Hanao at RBS.
But the dollar could be supported by caution over possible Japanese yen-selling intervention, dealers say.
Japan's top financial diplomat, Zembei Mizoguchi, said that currencies had been relatively stable over the past few weeks.
"There have not been any major moves over the past few weeks," Mizoguchi told reporters, when asked about comments by Finance Minister Masajuro Shiokawa on Friday that the yen was a bit strong against major currencies.
"It's been overall stable," he said. |
