TOKYO (AFX-ASIA) - The dollar turned lower against the yen in midafternoon trade, pressured by selling among exporters, dealers said. However, they added that overall trading was very quiet, as investors are reluctant to take any fresh positions ahead of US second quarter revised GDP data Wednesday, as well as an ECB governing council meeting Thursday.
A dealer at Shinsei Bank said that he expects dollar-selling will be short-lived after the revised GDP data, even though it is expected to show negative growth.
"A negative second quarter GDP figure (would) indicate that reduction of inventories in the US proceeded well during the period. I think a minus figure (would) provide a positive impact to third quarter growth in the US," the dealer said.
He said the dollar/yen will move in the range of 118.00-121.50 this week, adding that the governemnt will cary out verbal interventions at around the 118.00 level.
"I think Japanese authorities will step into the market (to sell yen) at around the 115.00 level," the dealer said. According to the local media reports this morning, Deputy Finance Minister for International Affairs Haruhiko Kuroda said the current rise on the yen is not 'appropriate' when current Japanese fundamentals are considered.
"It is true that the worldwide economy is not strong. However, the Japanese economy is not strong either ... I cannot find any reasons for the yen to become stronger," Kuroda was quoted as saying. The dealer said: "I think Japanese officials will send a message that market participants should look at economic indicators which show Japan's weak fundamentals."
Local media reports have earlier forecast that July unemployment, which will be released tomorrow, will rise to 5.0 pct level. The dealer said he expects that the ECB to hold its rate unchanged this week, citing strong M3 data.
A majority of market participants expect the ECB to cut its rate by 25 basis points this week.
"If considering the strong M3 data, I don't think the ECB is ready to cut its rate. I think the ECB will decide to cut 25 basis points in September," the dealer said, adding that the euro/dollar will move in the range of 0.9000-0.9300 this week.