TOKYO (AFX-ASIA) - The dollar was firmer in midafternoon trade, supported by continued technical short-covering following the sharp fall seen late last week, dealers said.
Overall trading was dull due to the long weekend in the U.S. and UK and ahead of the release of key economic indicators both in Japan and the U.S., they said.
In Japan, April industrial, salaries household spending and employment data are due for release tomorrow, while in the U.S., closely-watched non-farm payroll data will come out on Friday. "The market will shift its attention back to fundamentals, and forthcoming economic data in Japan will show that the underlying fundamentals have not changed a bit," Nomura Trust and Banking Co Ltd foreign exchange manager Takashi Toyohara said.
"U.S. data may gradually begin to show that the interest rate cuts start to have a positive impact on its economic activity."
Dealers said the release of latest earnings result by Japan's major banks also supported the dollar against the yen, reviving concern over the health of the domestic banking sector.
According to financial statements released by Japan's 16 banks, they incurred additional bad loans worth more than 3.0 trln yen in the second half to March 2001 alone, while eliminating non-performing loans with aggregate book value of some 4.4 trln yen in the same term. As a result, the leading banks held a combined 11.7 trln yen of problem loans that are required to be unloaded over the next two to three years in line with the emergency stimulus measures announced in early April.
BNP Paribas Securities senior analyst Naoto Odagiri said the latest financial statements suggest it is almost impossible for banks to successfully complete the final disposal of bad debt before the targeted deadline.
The Nomura Trust dealer forecast the dollar/yen will range in the 119-123 yen trading band this week, adding that market activity will be quiet.
The euro was easier against the dollar in line with the U.S. currency's rise against the Japanese unit, dealers said. "The focus of the market is whether the ECB (European Central Bank) will try to address the falling value of the euro," Toyohara said. The Nomura Trust dealer forecast the euro/dollar will move in the 0.84-0.88 usd range this week.