Hong Kong, Aug. 3 (BridgeNews) - Consolidation set in across the board in Asian Friday morning trade as the currency market awaited the release of U.S. July employment report due out later Friday. The dollar remained relatively weak, although it stayed above some key technical resistance levels against the major currencies. The Japanese currency was buoyed by a faltering Japanese stock market although the Nikkei did not fall far enough to have much impact.
Dollar/yen found U.K. names offering above 124.00. It later retreated to 123.72 on U.S. investment bank selling out of Asia and U.S. momentum fund selling.
The pair's short dated options volatility fell slightly, but there was a growing interest in buying out of the money low delta dollar/yen call options with a strike price of 130.00.
This suggested that some strategic players have begun to take a long-term bullish strategy, while the option premium is cheap. Friday's meeting of Japan's Council on Economic and Fiscal Policy will cover discussion of guidelines for budget estimates by government ministries and the timetable for economic reform, a Cabinet official said. The Nihon Keizai Shimbun reported Friday the Finance Ministry and the Council on Economic and Fiscal Reform, which are discussing budgetary request guidelines, are considering cutting fiscal 2001-02 (April-March) general expenditure by about 700 billion yen to around 48 trillion yen. This would be the first time in four years that the guidelines have requested a reduction in spending, the business daily said.
The major business daily also reported that the Japanese government and the U.S. administration agreed they will have a high level economic meeting in Tokyo in the middle of September.
The meeting will cover macro-economic policy of the U.S. and Japan, Japan's structural reform and U.S.-Japan trade issues.
Meanwhile, the Nikkei 225 Stock Average was down 70.92 points, or 0.6%, to 12,328.28 at midday, as profit taking set in, despite gains on Wall Street overnight.
In other currency trading, euro/dollar declined to 0.8816 on position squaring and euro/yen selling from funds.
The cross was capped by former resistance at 109.50, falling back to 109.12.