TOKYO (AFX-ASIA) - Major currencies were rangebound in midafternoon trade, with investors reluctant to take any fresh positions ahead of a rate decision by the European Central Bank tomorrow, as well as US July nonfarm payrolls data due Friday, dealers said.
They added that downside of the yen was well-supported, with caution setting in after an announcement that GE Capital is to acquire Fuji Bank's Heller Financial.
Aozora Bank deputy manager of forex trading group Hiroyoshi Kinoshita said that it is possible that the ECB will decide on a "surprise" rate cut tomorrow.
Currently, investors are expecting the ECB to keep its rates unchanged.
"ECB officials have previously said that they will conduct monetary policy with surprise. They may provide a surprise tomorrow," he said. Kinoshita said if the ECB decides to cut its rates, it is possible the euro will rise to the 0.8900-0.9000 level against the dollar, after breaching current resistance of 0.8825-0.8830.
He added that the euro will trade firmer against the dollar even if the ECB decides to hold its rates steady, as he sees the dollar currently to be overvalued.
If the condition of the US economy is considered, then "the current level of the dollar is overvalued," he said.
Kinoshita said the forex policy of the government is still uncertain after the victory of the Liberal Democratic Party in upper house elections Sunday.
"It is very difficult to trade dollar/yen at the moment, due to forex policy uncertainty by Japanese side," he said.