TOKYO (AFX-ASIA) - The dollar was holding firm in midmorning trade at around the mid-117 yen level after persistent intervention by Japanese authorities this week and last, dealers said. They said the dollar still faces downward pressure due to concerns over US economic conditions following the terrorist attacks on the country despite the technical rally seen on Wall Street overnight. The Swiss franc continued to fall after the Swiss National Bank cut its interest rates by 50 basis points, with the euro also seeing some profit-taking.
Bank of Tokyo Mitsubishi Ltd chief analyst Koji Fukaya said the dollar is being supported by the expectation of further persistent intervention by Japanese authorities, while the top-side is hindered by US-negative factors.
"The dollar-depreciation pressure remains ... but, at the end of last week and yesterday, Japanese monetary authorities intervened many times with high volumes," Fukaya said.
"Their (the authorities') intention is to keep the dollar at above 116 to mid-117 yen so the market cannot attack under that," he said. Fukaya said the intervention action has gained credibility with participants because the central bank can simply print yen to buy dollars, which is anyway in line with the aims of the Ministry of Finance and the bank to boost liquidity.
"Intervention by the MoF is good news for the BoJ as it injects more money. They only need to leave the money unsterilised," he said. However, he added that leaving intervention funds unsterilised in itself is ineffective as a way to boost the dollar, given the level of market interest in selling the US currency and the excess liquidity already in the domestic system.
"Intervention has only a (short-term) demand and supply effect," Fukaya said, adding that he expects the dollar/yen to remain within a range of 116-119 yen for the week.
On the other hand, the euro is expected to appreciate against the dollar, towards the 0.93 level, with intermitent profit-taking, as the European Central Bank is expected to hold off cutting rates at its meeting this week. "I think they will wait for the Federal Reserve," Fukaya said, adding that he expects the Fed to lower rates by a further 25 basis points at its next meeting.