By Masataka Nakamura
Tokyo, June 5 (BridgeNews) - The U.S. dollar/yen and euro/yen moved higher, helped by strong demand from Japanese parties. Inter-bank traders also covered their short dollar/yen and euro/yen positions, after failing to test the downside. A relentless fall in the Japanese stock market also helped to undermine the tone for the yen against the dollar and the euro.
* * * Asian Close NY Close Previous Asian Close Asian Range
(1500 JT) (1500ET) (1500 JT) (1500 JT)

USD/JPY 119.32 119.25 119.49 118.70-119.43
EUR/USD 0.8446 0.8460 0.8515 0.8434--0.8459
EUR/JPY 100.77 100.93 101.80 100.25--100.90

Early in the session, the market repeatedly tested the downside of the dollar/yen and euro/yen, as a follow-through action after a weak dollar/yen and euro/yen in the last New York session.
Large selling from Middle East names also contributed to weakness of dollar/yen, with trigger of stops below the 119.00 area. Euro/yen also lost ground, driven by a fall in dollar/yen.
Stop loss selling of euro/yen was also triggered at 100.50, which also put extra downside pressures on dollar/yen.
However, the downside move was sharply countered after the market met heavy dollar/yen demand in the 118.70-80 area and euro/yen demand in the 100.30-40 area.
Japanese investors, especially trust banks, were also aggressive buyers of the pair and the cross. After their buy, inter-bank traders were also covering their short positions to push the dollar/yen and euro/yen higher.
Stops were triggered above the 119.50 area, which underpinned the dollar/yen. However, the market lacked the follow-through action after the break, as it was facing good selling pressures near the 120.00 area.
Weakness of the Japanese stock market also helped underpinning the tone of the dollar/yen. Broad-based weakness of Japanese stock market was seen in Tuesday's session amid the cautious mood ahead of Friday's special quotation fixing of stock index June futures and options contracts. The Nikkei 225 Stock Average fell below the psychologically important 13,000 line for the first time since April 11 before ending 0.98% lower, or 130.35 points, at 13,182.00.
Masakazu Bunno, deputy general manager at international trading department at Sumitomo-Mitsui Banking Corporation said weakness of the stock market, amid market concerns about Japanese financial sector, weighed on the yen.
Euro/dollar fell to below 0.8450, led by the selling from German names early in the morning. Euro/yen selling pressures also put downside pressures on the pair as well. However, euro/dollar stabilized through the mid-session, after the market met good demand of euro/yen from the 100.30-40 region.
In the Asian afternoon, euro/dollar fell again, hitting a low of 0.8426 by a U.K. name out of Tokyo. It bounced to the low 0.8440s, with 0.8425 bids remaining intact.
Dealers remain bearish for the euro, because they see increase in capital outflow from euro-zone while the economic outlook worsens. Bunno at Sumitomo-Mitsui Banking Corporation said that there is still a risk for the downside of the euro/yen and the euro/dollar without clear indications of a reversal of euro weakness.
Handlesblatt's early economic indicator for West Germany fell from 2.1% to 2.0% in June. The newspaper argues that the indicator readings for April to June suggest a further slowdown in West German economic growth can be expected in the third quarter and that German government will be under pressure to lower its growth forecast below the current forecast of 2.0% for 2001.
The Japanese economic data releases and comments by Japanese officials failed to have an immediate impact on the yen.
The Minister of Finance Masajyuro Shiokawa said January-March GDP is seen fairly good, adding that he does not expect a big fall in GDP during April-June. This optimistic assessment of GDP is different from that of private sector economists, who see weakness in consumption and capital investment in the January-March quarter. GDP data is scheduled to be released on June 11.
Japan's minister for economy and fiscal policy, Heizo Takenaka, said it is important to cut the public debt/GDP ratio in the long run. For the economy, Takenaka said economic conditions are getting more severe. Japan's real spending by households with two or more members April fell 4.6% on the year, down 0.9% from the previous month after seasonal adjustment, the Ministry of Public Management, Home Affairs, Posts and Telecommunications said Tuesday. The ministry also said real spending by non-salaried households declined 3.5% on the year in April.
Japan's index of leading indicators, which shows economic conditions two to six months ahead, was 28.6 in April, compared with 20.0 in March, the Cabinet's Economic and Social Research Institute (ESRI) said Tuesday. The index of coincident indicators, which roughly shows current economic conditions, was 14.3 in April, compared with 11.1 in March.