By Yumi Kuramitsu Hong Kong, June 15 (BridgeNews) - Dollar/yen saw another quiet trading day in Asia Friday as the pair reacted only slightly to the Bank of Japan's decision to keep its monetary policy unchanged. Although the dollar firmed against the yen on a couple of yen negative factors, the topside was limited as the market remained wary of buying it aggressively after the National Association of Manufacturers said overnight the U.S. dollar was 25-30% overvalued. Dollar/yen traded 121.45 as of 1500 JT, compared with the New York closing level of 121.37.
The greenback gained ground against the yen amidst buying interest for the Tokyo retail fixing at 0955 JT, a sell-off in the Nikkei and a couple of yen negative rumors. Japanese shares ended lower Friday, but well off its low as earlier falls in the wake of the tumble of U.S. shares overnight were trimmed by short covering among selected defensive issues.
The Nikkei 225 Stock Average fell 56.28 points, or 0.4% to 12,790.38, after declining as low as 12,578.78. There was also some speculation of a looming Japanese rating downgrade during the early morning trade, but Moody's said Friday's seminar to Japanese clients was unrelated to ratings action. Additionally, there was some concern over a Financial Times article reporting that the Komeito party leader said the party would spit from the coalition if Prime Minister Junichiro Koizumi insisted on changing the non-military aspect of the Japanese constitution.
Before rising to the region's high of 121.70 in the afternoon trade, dollar/yen pulled back from around 121.65 to around 121.50 after the BOJ's policy board meeting concluded with a unanimous decision to leave policy unchanged. Before the BOJ meeting concluded, there was some speculation of some form of policy easing with the bank having faced verbal pressures from politicians and government officials for further easing. Yasuji Yamanaka, deputy general manager of the Treasury Division at Nikko Trust and Banking Corp. explained that as a possibility of further easing was considered very small--although there was such an expectation in the market--the market reaction to the bank's decision was very limited.
"The BOJ's decision is unlikely to have a large impact on the future direction of the foreign exchange market as the yen's weakness is attributable more to the weak fundamentals in Japan, rather than interest rate matters," said Noriyoshi Tsunoda, manager of the International Treasury Division Osaka at Fuji Bank Ltd. "With the economic fundamentals in Japan likely to remain weak, it is still hard to buy the Japanese currency. Therefore, there is basically no change in the view of weaker yen trend in the future," he said.
On the data front, Tokyo department store sales in May fell 0.1% from a year earlier to 168.6 billion yen, after rising 2.7% in April. The May figures are basically in line with the Cabinet Office's view with the office having said in its June economic report released Thursday consumption has basically continued to level, but weakness has been detected. In other trading, euro/dollar traded 0.8616-0.8631. Despite some selling above the 0.8630 resistance level, dealers said the buying interest below 0.8610 was stronger.
Euro/yen mostly mirrored the movements in the dollar/yen, trading in a tight range of 104.60-90 in the region.