TOKYO (AFX-ASIA) - The dollar turned higher against the yen in midafternoon trading due to a lack of follow-through selling to push the US currency to below the 125 yen level, dealers said. Earlier, the dollar fell to as low as 125.23 yen, hit by reported comments by Bank of England governor Eddie George.
George reportedly said at a regular Bank for International Settlements meeting in Basel that central bankers of member countries share the concern that a strong dollar may have an adverse impact on economic activity in the US.
However, his comments failed to have a lasting impact, as his remarks did "not go beyond similar concerns that have already been expressed by US manufacturers," Sumitomo Trust and Banking Co Ltd customer dealer Jitsuo Tachibana said.
A Credit Lyonnais dealer said the dollar also benefited from the announcement by Moody's Investors Service that it has placed the credit ratings and bank financial strength rating of Asahi Bank Ltd on review for possible downgrade.
But investors stopped short of testing the 126 yen level today on concerns that Vice Finance Minister Haruhiko Kuroda may try to check further weakening of the yen in the foreign exchange market, dealers said.
Kuroda yesterday declined to make any comment on the dollar's spike to beyond the 126 yen level.
"There is the view that he may begin to send some message to the market again, once the dollar rises back above the 126 yen level," Sumitomo's Tachibana said.
"And if he does so, the dollar may be pushed towards the 123 yen levels," he added.
"But, if there are no follow-through comments from other finance authorities, the dollar/yen is likely to remain in the 124-127 yen range," he noted.
The euro failed to extend its gains above the 0.85 usd level, after briefly testing this level on George's comments, dealers said. The Credit Lyonnais dealer said the euro may eventually reclaim the 0.86 usd level, adding that "correcting the weak euro could become the interest of all countries".