LONDON (AFX) - Dollar/yen continued to weaken in midday trade with Bank of Japan governor Masaru Hayami's remarks surrounding the possibility of intervention helping the Japanese unit, dealers said. The market took Hayami's comments to mean that intervention could be a possibility should the yen move rapidly against the dollar.
"We now appear to be moving into a new trading range with resistance probably at around 124.70," Barclays Capital analyst, Jane Foley said.
The Japanese unit had been adrift in the past week or so given the gloomy prognosis for the economy and more recently due to rumours of corporate bankruptcies which also led to sharp falls on the Nikkei. Intervention does not look very likely at this point. The BoJ is unlikely to resist a gradual decline in the yen's value against the dollar, she said.
The economic data out of Japan is indeed consistent with a weaker yen, she added.
Elsewhere, the euro continued to move lower taking sterling along with it.
The slightly bigger than expected fall in the euro zone seasonally-adjusted industrial production rate for April did not lead to a major sell-off on the dollar.
"People are accustomed that the data from the euro zone is generally going to be be weaker," Foley said, adding that the headline figure had been foreshadowed by soft outturns in Italy and France. The overall bias for the euro is still on the downside, she added. Bank of England Monetary Policy Committee member, Mervyn King's remarks playing down last month's higher than expected UK inflation data, cooled market hopes that UK rates may rise soon. Despite this, sterling was a touch weaker, taking its cue from the weaker euro.
The Swedish krona was steady after the series of supportive interventions from the Riksbank which signalled the bank's determination to shore up the currency.
The market was caught short on each occasion, she said, adding that the Riksbank has acquired a lot of credibility.