22 August 2001, 09:37  Asia FX Midday: USD/JPY mixed, EUR/USD down on Argentine deal

Tokyo, Aug.22 (BridgeNews) - U.S. Dollar/yen was mixed in a range Wednesday morning. U.S. names kept selling the pair, but the downside move was countered by dollar demand from Japanese investors and yen selling against Australian dollar. Dollar was firmer against European currencies, helped by a financial deal between Argentine and International Monetary Fund for U.S. $8 billion emergency financing.
Dollar/yen buying from importers and yen selling on crosses have supported the dollar against yen so far Wednesday. Dealers also point to good bids in the mid-119s, discouraging a downside movement. Meanwhile, the topside has been well capped by selling from U.S. names. Good buying of Australian dollar/yen from Tokyo has been underpinning dollar/yen and Australian dollar/U.S. dollar. In addition, dealers said that euro/yen was bid below the 109.80 level.
Some dealers said the Australian dollar is being favored on interest rate differentials, as the interest rate spread between the U.S. and Japan has narrowed after the Federal Reserve Board cut the Federal Funds rate by 0.25% latest Fed cut Tuesday. Other dealers are skeptical about the argument, however, saying that Australian dollar/yen buying could be only temporary.
Japan's Finance Minister Masajuro Shiokawa said that current yen levels are not good, adding that the MOF will continue to monitor foreign exchange moves. Shiokawa also said that the MOF would respond if yen rises are considered too excessive. The rhetoric of MOF Shiokawa has been largely expected.
The dollar/yen rose to above the 120.00 on Shiokawa's comment, but soon retreated back to the high 119's.
Some dealers said that the report that S&P may downgrade JGB ratings underpinned the U.S. unit early in the morning. However, later in the Asian morning, S&P denied such a speculation, saying that it has no plans to downgrade Japan's AA+ rating in the short term and that reports to that effect were misleading. The reaction to the report was not apparent, however.
Meanwhile, euro/dollar eased ground slightly, after Argentine and International Monetary Fund reached an agreement to financial aide package to Argentine. Long liquidation pressures also weighed on the pair. Argentina and the International Monetary Fund have agreed to U.S $8 billion in emergency financing, and the organization would support restructuring of Buenos Aires' $128-billion public debt to avoid default, the IMF said Tuesday.
Dealers said that the deal would clear one big financial uncertainty in that county, which would be seen in turn positive for overall Latin American financial market. They said that it would be bullish for the USD as well, as stability in Latin America would benefit U.S. investors and corporations which has strong presence in the region. Meanwhile, the top side of the euro/dollar was constrained by good euro/yen selling pressures above the 110.00 area.

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