TOKYO (AFX-ASIA) - The dollar was rangebound in cautious mid-afternoon trade as investors awaited the release of US economic data this week, dealers said.
The US consumer confidence index, Q3 GDP, NAPM and non-farm payroll data will all be released this week. Daiwa Bank Ltd dealer Nobuki Kawashima said that while the underlying positive sentiment towards the dollar remains intact, investors want their optimism reaffirmed by the data before re-testing the top-side of the unit.
Kawashima said the dollar is likely to test the 123 yen level if the data is not below expectations.
On the downside, the dollar was supported firmly on concerns over the economic performance in Japan, with the Bank of Japan's policy board members expected to issue a poor economic outlook after the end of today's policy board meeting, dealers said. "But the release of a poor economic outlook by the BoJ is not likely to fuel a strong upward momentum to the dollar, unless it comes together with the announcement of additional monetary easing," Kawashima said.
The Daiwa Bank dealer said he expects the dollar to hold to the 120-124 yen level this week, with concerns over the bio-terrorism threat in the US seen weighing on the up-side. The euro was higher against the dollar on short-covering, but its gains are being capped on caution ahead of the European Central Bank's policy board meeting later this week, dealers said. "If the ECB again votes to leave rates unchanged, the euro may be pushed lower towards the 0.8750 usd level, as such a decision is likely to seriously undermine the market's confidence in the euro," Kawashima said.