TOKYO (AFX-ASIA) - The dollar held to narrow trading ranges at midafternoon amid a lack of fresh incentives, with investors already having shifted their attention to next week's ECB meeting, dealers said.
In addition, concerns over possible verbal intervention by Japanese authorities continued to provide support on the dollar's downside, although fears over the collapse of the US economy also weighed on the top-side, they said.
"Unless the yen rallies towards the 115 yen level, physical intervention is not likely to be carried out, with the authority largely believed to limit any efforts to halt the rise of the yen to verbal ones at present levels," Toyo Trust and Banking customer dealer Issaku Taguchi said.
"Besides, given the present supply and demand conditions, physical intervention may simply create opportunities for profit-taking on the dollar when it rises."
Dealers, however, said the dollar may regain some ground lost to the yen due to seasonal rises in demand for the dollar and the release of poor economic indicators in Japan.
The Asahi Shimbun reported yesterday, without citing sources, that Japan's unemployment is likely to hit 5.0 pct, an all-time high, in July, up from the 4.9 pct seen in May and June.
"Such poor economic data may provide some negative impetus to the yen, and if they are negative enough, the dollar may be pushed to around the 122-123 yen levels," Taguchi said.
Economic data due for release in the next week also include industrial output, household spending and retail sales.
The euro was also confined to narrow trading ranges ahead of the approaching ECB meeting, after the release overnight of weak German GDP data strengthened hopes for a 25 basis point rate cut, dealers said. "Participants seriously want the ECB to cut rates, but they are still unable to rule out the possibility of no policy change, given the past monetary policy management practice by the ECB," Toyo's Taguchi said.
"Therefore, they are feeling the risk related to aggressively buying into the euro, especially to beyond the 0.92 usd level."