31 October 2001, 08:52  Forex - Yen slightly higher after weak US data, upside capped by mth-end deals

TOKYO (AFX-ASIA) - The yen was slightly higher against the dollar following poor US consumer data overnight, but its upside was capped by month-end deals, with Japanese trust banks buying dollars, and amid hopes the Federal Reserve may now cut rates by 50 points, dealers said. They added investors remain cautious ahead of the US third-quarter GDP data tonight and NAPM and jobs data later this week, while the threat of verbal intervention by the Japanese government limits the dollar's downside. Bayerische Hypo und Vereinsbank foreign exchange manager Yoshihiko Yotani said the dollar continues to be supported in Tokyo trade, despite weak economic figures, by interest from domestic trust banks at the month-end. "The overnight consumer confidence figure was extremely bad. The market is looking for downside against the yen and euro but the overnight reaction saw the dollar/yen ... recover to the 122 figure," Yotani said. "Real demand, especially from trust banks, is still looking to buy dollar," he said, adding this is mainly some month-end demand after the close of the last fiscal year in September. "Today is the end of the month so there's still demand for dollar and euro but the upside will be limited after today," he said, noting that these flows will then subside. The buying of Treasuries by Japanese institutions, which has been a notable feature of the start of the second fiscal half, will not support the dollar as investors are looking for securities-trading gains, rather than forex gains. "They are buying Treasuries ... on a fully hedged basis," Yotani said. The dollar's downside is also supported by expectations that the Japanese government will talk up the currency any time it heads towards the 120 yen. "Maybe 121.50-122.50 yen is the core range," he added.

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