By Yumi Kuramitsu
Hong Kong, July 3 (BridgeNews) - The yen gained ground against the dollar in Asia Tuesday as market players continued to buy back the Japanese currency and sold the greenback to take profits. Japanese Prime Minister Junichiro Koizumi's remarks in the Financial Times newspaper that Japan has no intention to push the currency down supported the tone for the currency. The yen rose to as high as 123.67 against the dollar and traded 123.86 as of 1500 JT, compared with the New York closing level of 124.29.
The yen rose from a low of 124.14 to a high of 123.67 in early morning trade as players sold the dollar to take profit, inspired by the Koizumi's remarks in the FT article.
The players took the FT story as a good excuse to buy back the yen and sell the dollar amid a lack of other major incentives.
"Amid the corrective mode from the recent dollar/yen's strength, the market took the Koizumi's story as a good reason to adjust their positions, encouraging buy-back of the yen," said Shigehiro Kamimura, manager of the Market Trading Department at Asahi Bank Ltd.
"I believe the correction is likely to continue especially ahead of the U.S. Independence Day holiday Wednesday, making the dollar/yen's topside heavy," he added.
However, the yen's rise was also relatively limited as dollar-buying/yen-selling emerged near the 123.70 area amid continued general weak sentiment for the Japanese currency, together with some euro-buying/yen-selling action.
In the afternoon trade, the yen fell again as a wire carried an interview with former Bank of Japan official Yukitsugu Nakagawa saying that BOJ Governor Masaru Hayami would likely accept a gradual fall in the yen.
But, the greenback was well offered above the 124.00 level with European names spotted selling aggressively and it eased back to around 123.80-90 against the yen.
The market reacted little to a comment by the former vice finance minister for international affairs at Japan's Ministry of Finance, Eisuke Sakakibara, who said Japan's monetary authorities should leave the weak yen alone.
Sakakibara, in an interview with Asahi Shimbun, said it is a general rule that the yen is weak because of the sluggish Japanese economy. This is because foreign exchange rates should reflect economic fundamentals. Sakakibara said the Japanese economy seems to have already entered a recession.
Other Japanese officials comments were also ignored by the market. Japanese Finance Minister Masajuro Shiokawa said Tuesday that he wants to keep the country's economy growing.
Japan Liberal Democratic Party Secretary-General Taku Yamasaki said he is not considering an extra budget at this moment and said he cannot consider the issue until the extra Diet session convenes.
The comment is in line with other Japanese officials, including Shiokawa who had said earlier this month it is too early to consider if a supplementary budget is necessary.
Senior LDP lawmaker Ichizo Ohara said that the BOJ should increase the target for the current account balance from 5 trillion yen to 10 trillion yen.
Ohara also asserted that the BOJ should increase the outright purchase of long-term JGBs.
Meanwhile, Japanese shares ended Tuesday higher in thin trading, as optimism over the outlook for the U.S. economy was fueled after a positive report from the U.S. National Association of Purchasing Managers. However, the market was top-heavy on a lack of follow-though buying amid a broad-based wait-and-see mood, traders said. The Nikkei 225 Stock Average rose 66.23 points, or 0.5%, to 12,817.41.
In other currency trading, euro/yen fell to 104.73 from 105.25 on the back of dollar/yen selling in early morning trade.
However, the cross rebounded above the 105.00 level as players bought the pair to take profits on the downside, helping to also push up euro/dollar from 0.8463 to 0.8477 in late morning trade.
Euro/dollar extended gains to 0.8487 in afternoon trading on buying from European players before the topside was capped by selling from a major U.S. bank.