TOKYO (AFX-ASIA) - The yen continued to strengthen at midafternoon on the back of the depreciation of the euro due to receding expectations for any immediate action by the financial authorities, dealers said.
Vice Minister of Finance for International Affairs Haruhiko Kuroda today declined comment on the possibility of joint intervention to support the euro.
"The euro has been falling sharply, causing a variety of effects in the foreign exchange market, so I hope the euro recovers against the dollar and yen as soon as possible to reflect economic fundamentals," he said.
Finance Minister Masajuro Shiokawa said the forex market is moving normally and the government should avoid intervention when this is the case.
Shinsei Bank foreign exchange manager Masanori Hirabayashi said growing selling of the euro by Japanese exporters was also exerting a more strong downward pressure.
Japanese exporters, including Toyota Motor Corp, generally budgeted their year to March 2002 business plans at the exchange rate of 105 yen against the euro.
However, the yen stopped short of testing the psychologically important 100 yen level against the euro immediately, supported by option-linked deals, dealers said.
"Everybody is not in a hurry to test the downside of the euro, as they feel that the currency will fall to below this level sooner rather than later," Shinsei's Hirabayashi said.
"The market is already eying at the 97-98 yen level."
Dealers said the yen is also expected to be exposed to further upside risk against the dollar, citing high levels of long positions in the dollar against the Japanese currency.
"If those who still have long positions in the dollar were to unload such positions uniformly, the yen may visit the 117 yen level," Hirabayashi said.
"And if the yen successfully breaks this level, it may test the 115 yen level."
The euro, meantime, was pushed off its lows thanks to short-covering ahead of the release later today of the U.S. non-farm payroll data, but the currency may not be able to come out of the downtrend immediately, dealers said.
The market is expected to continue to test the ECB's resolve against the backdrop of ECB president Wim Duisenberg's reiteration overnight of the bank's overriding preoccupation with inflation which was taken to hint that intervention is not likely at this juncture, they said.
"But the euro may be strongly supported at around 0.82 usd level," Shinsei's Hirabayashi said.