TOKYO (AFX) - Major currencies were rangebound in mid-afternoon trade, with no fresh leads ahead of the weekend, as well as the Federal Open Market Committee meeting next week, dealers said.
A dealer at a regional Japanese bank said he expects the euro will gradually fall to the 0.8500-0.8400 level against the dollar as he expects the European Central Bank to lose some credibility after its surprise rate cut decision.
"The ECB decided to cut its rate even though there are still inflation concerns in euro-zone countries. It seems to me that there is no set policy at the ECB," the dealer said.
He said the euro will also be pressured against the dollar by a recovery in U.S. consumption after several rate cuts by the Federal Reserve this year.
"In addition, the U.S. employment situation seems to be improving. I expect that concerns of a U.S. economic slowdown will be somewhat eased," he said.
"It is possible that the Fed will decide to cut the rate by only 25 basis points," compared with market expectations of 50 basis points. Yesterday, the U.S. Labor Department said initial claims for regular state unemployment benefits fell 41,000 to a seasonally adjusted 384,000 for the week ended May 5, from a revised 425,000 in the previous week.
The dealer added that the dollar/yen will continue its directionless trade ahead of the Fed decision, moving in a tight range around the 122.00 level.