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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