TOKYO (AFX-ASIA) - The dollar was stronger against the yen, with investors buying into any weakness, though so far has failed to breach the 126 level, dealers said.
"Though the dollar eased in midmorning here after yesterday's breach of 125 yen on overseas markets, it is still maintaining a strengthening trend, helped by yesterday's strong US economic data, which led investors to buy on dips," said Yasuji Yamanaka, a deputy general manager at Nikko Trust and Banking.
The dollar was helped by strong non-manufacturing NAPM data last night that added to evidence the US economy has struck bottom. "However, the dollar's upside was being capped ahead of the weekend. Given Japan's currently weak fundamentals, the dollar's rising trend will go on into next week, but it is unlikely that the market will see a sudden, sharp rise of the dollar against the yen because the market will have concerns that other Asian countries will possibly issue warnings if the dollar moves up sharply."
Yamanaka also said: "The market is closely watching today's release of the US employment data. If the results match expectations, the current stronger dollar trend will continue gathering steam." The euro was also stronger versus the yen, rebounding to the 105 level after dipping to 104 in the morning following the European Central Bank's decision to leave rates unchanged last night, as was expected.
There were few signs from the ECB that the bank is ready to ease in July, as some market participants had been hoping for, dealers said. "The bouncing back of the euro suggested that buying interest was still strong when it fell below 105 yen. If the ECB decides to cut its key interest rates at the next meeting to be held before the upcoming G7 summit, the euro will get support from the action. Until then, the euro will fluctuate at around 105 yen," Yamanaka said.