2 August 2001, 08:56  Asia FX Midday: Dollar remains heavy; euro keeps firm tone

Hong Kong, Aug. 2 (BridgeNews) - The U.S. dollar remained heavy against most currencies in the Asian morning session Thursday. Although top-heavy, dollar/yen saw some support from aggressive buying of the euro against the Japanese currency. The European currency kept a firm tone, extending overnight gains both against the yen and the dollar to 110.15 and 0.8841, respectively.
There was no major news in the Asian session. However, the market took a close look at White House economist Lawrence Lindsey's letter in The International Economy magazine.
Lindsey defined the "strong dollar policy" as preference for "global willingness to hold dollars and dollar denominated assets." This contrast with perceptions that a "strong" dollar meant "rising" greenback.
Dollar/yen initially fell to 124.31 on loss-cut selling before bouncing to 124.70 on Middle Eastern buying and euro/yen demand. Gains were slowed by another sharp recovery in the Japanese stocks and euro/yen selling above 110.00.
Japanese stocks surged on Nasdaq gains which were driven by Merrill Lynch's bullish call on the semiconductor sector. The Nikkei 225 rose 267.31 points or 2.2% to 12,226.64, breaking 12,000 for the first time since July 25.
Meanwhile, Nihon Kezai Shimbun reported that Japanese Minister of Administrative Reform and Deregulation Nobuteru Ishihara said the Cabinet of Prime Minister Junichiro Koizumi should take advantage of the ruling Liberal Democratic PartyP's victory in the election to promote reforms of public corporations and fight against opposition to the reform from bureaucrats.
He said the victory shows public support for Koizumi's proposed structural reform.
The major Japanese business daily also reported that Asahi Bank, Daiwa Bank and Chuo Mitsui Trust and Banking Co. are expected to increase their bad-loan disposals in fiscal 2001-02 (April-March) by 25-50% from their end-May projections.
The three banks plan to increase their bad loan disposals by more than 80 billion yen in total.
In other currency trading, euro/dollar rallied from 0.8806 to 0.8841 on euro/yen buying and stop-loss hunting above 0.8830, before being restrained by euro/yen selling and European selling ahead of major trend line resistance at 0.8850.
A cautious tone prevailed before the European Central Bank's governing council meeting slated for later Thursday and Friday's U.S. jobs data, although dealers thought that a surprise ECB easing would benefit euro/dollar by improving expectations for European economic growth.

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