TOKYO (AFX-ASIA) - The dollar turned top-heavy against the yen in midafternoon trade on a lack of follow-through buying after rallying earlier on weak Japanese economic data released this morning, dealers said.
The U.S. currency reached 121.38 yen after the Ministry of Economy, Trade and Industry data showed industrial output in April fell 1.7 pct month-on-month, compared with a consensus private sector estimate of a 0.9 pct fall.
But investors became unwilling to accumulate further long positions in the dollar ahead of the resumption of foreign exchange trading in offshore markets, dealers said. The U.S. and UK markets were closed yesterday for a holiday.
"In particular, people wanted to see how the euro will perform later today in the offshore markets after its slide triggered a strong appreciation of the yen last week," Hachijuni Bank dealer Naoya Kozu said.
Investors also refrained from actively buying the U.S. currency ahead of the release Friday of U.S. non-farm payroll data after U.S. Fed Chairman Alan Greenspan hinted at possible further rate cuts last week, dealers said.
"As there is the emerging view that U.S. interest rates may shortly bottom out of a falling cycle, people just want to know if there will be a final push in the current cycle," Kozu said. He expects the dollar/yen to trade in a 118.80-122.00 yen range this week.
The euro lost strong upward momentum after staging a rebound on comments by European Central Bank President Wim Duisenberg overnight, who said intervention to bolster the euro is a possibility, dealers said.
"It is a weapon in our arsenal," Duisenberg said.
Hachijuni Bank's Kozu said he cannot rule out the possibility of a resumption in the downtrend of the euro, adding that "intervention, even if it is carried out, will probably not be able to push up the euro sharply."
He added: "Rather, intervention may simply create a tangible target for selling the euro."