22 June 2001, 10:59  Asia FX Review: USD/JPY hits 2 month high

By Yumi Kuramitsu
Hong Kong, June 22 (BridgeNews) - Dollar/yen maintained a firm tone when it opened in Asia Friday, rising to as high as 124.74 to mark the highest level since April 16. Yet the pair closed nearly 40 points off the day's high due to Japanese exporter offers which were waiting on the topside and market players' sales to lock in profits. However, the downside remained solid amid bullish near-term sentiment for the pair. Dollar/yen closed slightly lower at 124.37 in Asia, compared with the New York closing level of 124.57.
Dollar/yen hit the region's high of 124.74 in early morning trade as the market continued to buy the pair as it maintained firm tone from the New York trading overnight.
However, as offers from Japanese exporters and other Japanese players were said thick above 124.70, profit-takers and those who bought the pair early in the morning unwound their positions, pressuring the pair down to 124.18.
In addition to profit-taking and exporter selling, options-related sales ahead of the rumored knock-outs at 125.00 put an extra downward pressure on the pair.
"Offers from exporters and Japanese banks were said to be piled up at the 124.70-125.00 area, making dollar/yen's topside heavy. Therefore, those who bought earlier gave up further gains and pressured the pair down," said Yasuji Yamanaka, deputy general manager of the Treasury Division at Nikko Trust and Banking Corporation.
"However, on the downside, there were many players waiting to buy the pair at the 124.20-30 level as sentiment remains bullish," he added. After falling to the low, dollar/yen bounced back to around 124.45 as short-covering emerged on the downside.
Reports on Wednesday of comments from U.S. economic advisor Lawrence Lindsey apparently accepting yen's weakness as a result of Japanese structural reform, continued to attract attention as a yen-negative. In addition, Thursday's comments from U.S. Treasury Secretary Paul O'Neill, reiterating the strong dollar-policy were seen as positive for the greenback.
The market reacted little to comments from Japanese officials. Japan's Vice Finance Minister for International Affairs Haruhiko Kuroda said the Japanese currency should reflect fundamentals.
Finance Minister Masajuro Shiokawa said he would make a comment to the press of the ministry's judgment when the foreign exchange market shows volatile moves, indicating he doesn't yet think the current move is extreme.
Shiokawa said he is interested in remarks by Lindsey over the yen, but didn't make further comments over the issue.
It will be difficult for Japan's banks to write off their non-performing loans as quickly as they had hoped if the economy grows at only between 0.0% and 1.0% in fiscal 2001-02 (April-March), Minister for Financial Services Hakuo Yanagisawa warned Friday.
Yanagisawa said he thinks the economy will grow at least 0.5% and he will continue to do his best to promote bad loan disposal despite the difficult economic environment.
Former Bank of Japan official Toshihiko Fukui said Friday it would be a mistaken policy to allow large capital outflows that would result in a weakening of the yen.
Fukui's comments suggest that the central banks has a role to play in limiting any large-scale capital outflows.
He said it is untrue that monetary policy has no limit. Meanwhile, Japanese shares ended Friday firmer buoyed by the release of the government's outline for economic reform and sustained gains on Wall Street.
The Nikkei 225 Stock Average rose 82.18 points, or 0.6% to 13,044.61, closing above 13,000 for the first time since June 11.
In other currency trading, euro/dollar slipped quietly from New York closing level of 0.8555 to 0.8532 as euro/yen found sellers near technical resistance at 106.60. The cross fell back to 106.00.
However, euro/dollar rebounded to near 0.8545 in the afternoon trade as the cross rose back to 106.30 on some short-covering and on the back of the dollar/yen's rebound.

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