Hong Kong, Aug. 15 (BridgeNews) - The U.S. dollar remained heavy in the Asian morning trade Wednesday after the International Monetary Fund claimed it was at least 20% overvalued. Dealers were generally skeptical of the validity of the IMF report, but impressed by the fact that the market reacted to this.
Trade was thin with Japanese Obon week celebrations in full swing. Euro/dollar extended overnight highs amid bearish sentiment for the greenback.
Dollar/yen fell from an early high of 121.90 to a low of 121.37 before bouncing on the back of some euro/yen buying from Japanese names. Dealers saw long liquidation selling, offset by importer buying. Bids were rumored at 121.20/30 ahead of stops below 121.00.
Japanese officials were silent, mostly because of Obon week holidays. Japanese shares ended lower amidst yen's strength and fear of unwinding of cross share holdings. The Nikkei 225 fell 177.99 points, or 1.5%, to 11,739.96.
In other currency trading, euro/dollar rose from 0.9022 to 0.9045, exceeding the overnight high of 0.9039, on U.S. buying and euro/yen buying from a Japanese bank.
European offers were rumored on at 0.9050 and 0.9080, apparently for profit taking. Bids were rumored near former resistance at 0.9010. Sterling/dollar and dollar/Swiss franc traded 1.4282-1.4295 and 1.6728-1.6795, exceeding respective overnight highs and lows at 1.4294 and 1.6790.
Britain's finance minister has ordered the Treasury to begin assessing his five economic tests for adopting the EUR, a move that will prompt speculation of an impending referendum on the issue, the Daily Telegraph reported.