26 October 2001, 10:13 Forex - Dollar lower in midafternoon Tokyo trade on profit-taking
TOKYO (AFX-ASIA) - The dollar was lower in midafternoon trade, hit
by active profit-taking after the unit rose to above 123 yen earlier,
dealers said.
Earlier, the dollar reached a high of 123.18 yen in line with the
firm tone set overnight in New York on the back of the strong rally on
Wall Street seen near the close, which more than offset dollar-negative
news from the release overnight of US durable goods data, they said.
North Pacific Bank foreign exchange manager Toshikazu Shimamura
said the market will continue to watch closely the release of major US
economic data next week and the market's reaction to such data.
US consumer confidence, Q3 GDP and non-farm payroll data will be
released next week.
"As most data is most likely to provide negative leads for the
dollar, the unit is expected to undergo a mild correction in the next
week," Shimamura said.
"But if the US capital markets can stand firm against the likely
poor result from next week's economic data, just like it did so
overnight, any technically-driven falls in the dollar will be limited,"
he said.
Investors will also continue to monitor closely any developments in
the current bio-terrorism scare and the US-led military operation in
Afghanistan, dealers said.
If the situations do not go out of hand, "the dollar will be able
to see strong demand anywhere below the 122 yen level," Shimamura said.
"And if the dollar is able to support such level, then it will
eventually test the 125 yen level, in the continuation of the ongoing
bull trend," he said.
The euro was firmer on short-covering, but the unit is expected to
be exposed to the downside risk due to uncertainty over the monetary
policy management by the European Central Bank, which decided to leave
interest rates unchanged despite the ongoing deterioration of the
economic activity there, dealers said.
"Despite the ECB's decision overnight, there is the underlying
belief that that it will be only a matter of time before the ECB
decides to cut rates," Shimamura said.
"However, we should remain alert to the possible test of the 0.8850
usd level," he added.
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