By Masataka Nakamura
Tokyo, May 10 (BridgeNews) - The U.S. dollar moved in a tight range in listless trading. The selling from Japanese exporters and profit-takers weighed on the dollar/yen. However, the downside move was halted when the market faced good dollar bids near the 122.00 area. Weakness of the Japanese stock market also discouraged the downside movement of the dollar/yen. Euro trading was lackluster in Asia ahead of the European Central Bank meeting Thursday.
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Asian Close NY Close Previous Asian Close Asian Range
(1500 JT) (1500ET) (1500 JT) (1500 JT)
USD/JPY 122.21 122.16 121.63 122.03-122.25
EUR/USD 0.8868 0.8852 0.8837 0.8855--0.8871
EUR/JPY 108.40 108.10 107.49 108.14--108.40

Early in the session, dollar/yen dipped from 122.30 to 122.03 as the Nikkei 225 stock index initially rallied in the face of overnight losses in the Nasdaq. There was also some selling from Japanese exporters and profit-takers, weighing on the pair.
Furthermore, dealers said that euro/yen selling and Australian dollar/yen selling put extra downside pressures on dollar/yen. However, early strength in the Nikkei proved limited and dollar/yen was well bid in the 122.00-122.10 area.
The Nikkei 225 stock index hovered in a minus territory from midday, led by the weakness in the futures market. The weakness of the Nikkei casts a shadow over the yen, discouraging the downside momentum of the pair. The Nikkei 225 stock index fell 67.06 points or 0.48% to end at 14,017.79.
Short-term dealers also tried to sell down the pair, to aim at triggering stops below the 122.00 area. However, those selling were countered by numerous bids around the 122.00 area.
Jitsuo Tachibana, manager of financial products and marketing department at Sumitomo Trust & Banking, said that the dollar/yen was well supported around the 122.00 area, adding that technicals indicate slightly bullish picture for the pair.
Overall, the performance of the Japanese stock market is being watched closely to gauge the direction of the dollar/yen. Tachibana at Sumitomo Trust & Banking said that a limited price action in the Japanese stock market was responsible for narrow range trading for dollar/yen during the Tokyo session.
There is talk that good amounts of options with a 122.20 strike are expiring Thursday and Friday, which contributes to confining the pair in a narrow range. Delta hedge buying below the 122.20 area and selling below above the area are seen checking the dollar/yen's movement so far. Euro/dollar has poked up to 0.8871 on some buying from a large U.S. bank.
The buying may be aimed at stops in the 0.8870/90 area, but there is some fresh selling interest at 0.8885 that might slow it down. Dealers are looking to stay flexible with the ECB meeting coming up. A surprise easing might initially be seen as positive, but there could be some concern that the ECB is behind the curve, after recent economic data.
USD/Swiss Franc selling continues to support euro/dollar, with dollar/Swiss franc falling to 1.7363 after finding a good offer at 1.7393 early Thursday.
Consolidation prevailed across the board. The market failed to find any major incentives to trade.
U.S. Treasury Secretary Paul O'Neill said he expects the U.S. economy to recover after inventory overhang is cleared. O'Neill added he is confident on the outlook for U.S. productivity. He said it is important that Japan returns to its potential economic growth rate, adding that the speed of economic reform for Japan is for the Japanese government to decide.
O'Neill also said it was important that Japan achieve "strong, stable growth" after nearly a decade of stagnation. He welcomed the commitment of newly elected Prime Minister Junichiro Koizumi to economic reforms and looked forward to "seeing Japan take the steps needed to trigger an enduring recovery."
Japan's domestic wholesale price index fell 0.7% on the year in April, dropping for the seventh month in a row, the Bank of Japan said Thursday. The decline was larger than the average market expectation of a 0.6% drop, but had no impact on the yen.
Japan's Ministry of Finance is considering disclosing more data on foreign exchange interventions and is negotiating with other nations about such disclosures, the Mainichi Shimbun reported Thursday. The newspaper said the negotiations are in the final stage and the MOF will reach a conclusion this month.