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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