By Masataka Nakamura, BridgeNews
Tokyo--Feb. 5--Euro/yen buying from US names and European names set the market early Monday session, pushing U.S dollar/yen and euro/dollar higher.
Overall, the Tokyo stock market's weakness undermined the yen. However, dealers focused on euro/yen rather than dollar/yen to reflect the yen's fundamental weakness because of the dollar's technically top heavy posture against the Japanese currency. Meanwhile, trading was stuck in a range after early euro/yen buying fizzled.
Euro/yen was driven up from 108.10 to 108.90 by a U.S. bank out of Tokyo and some German names, before It found resistance ahead of an hourly pivot level at 109.00.
Euro/dollar dipped from 0.9355 to 0.9341 on steady, but light selling pressure in early trade, but rallied swiftly to a high of 0.9394 on euro/yen buying and buying from U.K. and Japanese names out of Singapore. However, the upward momentum fizzled near the 0.9400 area where good offers were rumored to be placed.
Dollar/Swiss Franc and Cable basically followed the movement of euro/dollar in illiquid market conditions.
Handlesblatt's West German early indicator of underlying economic trends for February was 2.1%, down 0.3%. Handelsblatt says this suggests growth in German gross domestic product will slow to below 2.5% on a sliding annual scale in the second quarter of 2001, after a 3.1% in 2000. The report failed to inspire the market.
Dollar/yen firmed from 115.63 to 116.05 on euro/yen buying and fixing demand. The pair was also encouraged by Japanese stock market weakness. It was resisted by an hourly pivot level at 116.00 and the resistance line from 119.90, at 116.15/20. There is talk of good offers in the 116.10-20 area, discouraging the upward momentum.
The Nikkei 225 Stock Average ended the session at 13,285.52, down 318.11 points lower in sluggish trade, reflecting declines on Wall Street on Friday, while sales to liquidate cross-held shares also continued to weigh on the market.
Particularly, high tech and telecom stocks were under selling pressure. The benchmark index fell 243.30 points, or 1.8%, to 13,460.43. The Nikkei 225 Mar futures contract closed down 280 at 13,470 on the Osaka Securities Exchange.
Jitsuo Tachibana, manager for financial products and marketing department at Sumitomo-Trust & Banking, said that the dollar/yen could carry a positive tone this week, as the market turns its focus to weak fundamentals in Japan from negative U.S. economic data last week. Tachibana added that Monday's foreign exchange market was sensitive to a fall in the Tokyo stock market.
The dollar/yen market did not show response to the following news reported Monday.
Japan's index of leading economic indicators stood at 50.0 in December, compared with a revised index of 30.0 in November. The index of coincident indicators improved to 71.4 in December from 30.0 in November. The Cabinet office said the improvement in the coincident index reflects stronger output and better labor conditions.
Liberal Democratic Party lower house legislator Ichizo Ohara told BridgeNews Monday that contrary to what Finance Minister Kiichi Miyazawa and Bank of Japan Governor Masaru Hayami say, the economy isn't gradually recovering, and called the two leaders "heedlessly optimistic."
Ohara also said that he wants BOJ to directly underwrite JGBs. Ohara's comment failed to affect the market. There is doubt that Ohara can have a strong influence on BoJ's policy, despite his strong comments.
Prime Minister Yoshiro Mori answered questions from opposition parties in a parliamentary session on a range of issues from the economy to KSD. But Mori's comment failed to inspire the market.
Mainichi Shimbun reported KSD provided a total of more than 50 million yen to 112 Diet members from 1991-2000. End