10 August 2001, 09:57  Forex - Dollar recovers some ground in midmorning Tokyo after overnight losses

TOKYO (AFX-ASIA) - The dollar was higher in midmorning trade, recouping some of its overnight losses but remaining vulnerable to further selling in the thinly traded and volatile summer market, dealers said. Japanese officials have suggested that the decline in the dollar/yen was abnormal and that it may have gone too far, raising concerns over increased verbal intervention. Finance Minister Masajuro Shiokawa said this morning that he doubts that the current strength of the yen reflects the normal activity of the foreign exchange market. "The dollar was sold in London and New York. I doubt this movement reflects normal activity in the foreign exchange market," he said. Chase Manhattan Bank Tokyo branch forex market analyst Minori Takeuchi said the dollar/yen still looks vulnerable from a technical perspective, though the fundamentals of the Japanese economy may not support a much lower level. "From a technical point of view, the dollar/yen is volatile and vulnerable on the downside but, looking at Japan's fundamentals, I don't feel like selling the dollar from here," she said. The dollar is showing weakness, rather than the yen showing strength, Takeuchi said, noting that gains in the Japanese currency against the US unit came after the euro's rise overnight. "It started with (dollar) weakness against the euro and Swiss (franc) and finally triggered a fall against the yen," she said. The dollar has strong support at 120.80 yen, she said. "If this is broken, it could go as low as 118.30," Takeuchi said, adding that given the thin trade, this remains a possibility. Takeuchi said investors have become sensitised to negative news from the US, a reversal of earlier worries over the eurozone. "Recently, the hopes for a rate cut have supported the euro while on the other hand the expectation of a cut by the Fed does not help the dollar. People are sensitive to bad news from the US," she said. The euro is supported at 88.70 cents "and we don't see strong resistance until 90" cents, Takeuchi added.

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