20 August 2001, 10:24 Forex - Dollar rangebound in midafternoon Tokyo ahead of FOMC
TOKYO (AFX-ASIA) - The dollar was rangebound against the yen in
midafternoon trade ahead of the US Federal Open Market Committee
Meeting tomorrow, dealers said.
The US Fed is widely expected to decide on a 25 basis point cut at
the meeting, but some speculation is underway that the FOMC may reduce
interest rates by as much as 50 basis points, dealers said.
Sumitomo Trust and Banking Co Ltd chief customer dealer Jitsuo
Tachibana said the dollar may not see a sustained rebound in either
case.
"In case of a 25 basis point cut, the market will probably not show
any strong reaction, although it may disappoint some speculators who
are expecting a 50 basis point cut," he said.
"Even a 50 basis point cut may not help the dollar, as the market
may take the action as a reflection of a more severe-than-expected
economic condition in the US."
The dollar was supported on its downside by to a sustained fall on
the local equity market, dealers said.
"Investors will be watching closely how the US capital markets
react to the FOMC's rate announcement as, depending on developments
there, the dollar may see some short-lived gain," Tachibana said.
He said he expects the dollar to continue to range from
118.00-122.00 yen, with the possibility of being re-exposed to downside
risk once again.
"Fears over a verbal intervention should continue to support the
downside of the dollar," he said.
The euro was also little changed ahead of the FOMC meeting this
week and the European Central Bank meeting next week, dealers said.
"Underlying positive sentiment towards the euro is expected to
remain intact, given a further widening of interest rate differentials
between the US and Europe," Tachibana said.
"But some may begin to try to cash in on the euro's prolonged gain,
now entering its seventh week of a rise."
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