Currency Traders Remain Bearish On Dollar, Euro
TOKYO (Nikkei)--Strong expectations the dollar and euro will continue to lose ground against the yen persisted Tuesday, despite intervention by the Bank of Japan to stem the yen's climb.
The market sees strong dollar-selling incentives in the uncertainty over Brazil's economy and fears of an overheated U.S. stock market. Most traders and strategists also view the euro as an attractive sell due to the weakness of European economies.
That leaves the yen as the currency with the least bearish outlook of the three.
Most observers say the market will continue to see a tug-of-war pitting dollar and euro sell incentives against yen-selling intervention by Japanese monetary authorities.
Japan's central bank stepped in Tuesday, buying 2 billion dollars with yen to push the greenback above 111 yen from below 109 yen.
"The authorities have demonstrated they will not tolerate an exchange rate below 110 yen," said a division chief at Sanwa Bank (8320).
Nevertheless, "the dollar's weakness is not over and it will test 110 yen again," said a currency dealer at Sakura Bank (8314).
Last week, the large Brazilian state of Minas Gerais declared a moratorium on repaying debt to the federal government, aggravating uncertainty over that country's economic prospects. Meanwhile, concern about the dollar and fear U.S. stocks will fall sharply from recent record highs continue to smolder.
Confidence in the euro seems even lower. "Looking at the employment situation, the German economy is likely only to get worse, while the U.S. is relatively sturdy. The euro will likely lose more ground against the dollar," said one strategist at Nippon Life Insurance Co. "Our company will avoid investing in euro-denominated bonds until the end of March," he added.
(The Nihon Keizai Shimbun Wednesday morning edition)
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