TOKYO, Oct. 4 (Kyodo) - By: Yoshino Matsui The U.S. dollar lost ground against the yen Thursday in Tokyo on position-squaring sales ahead of Saturday's meeting in Washington of Group of Seven (G-7) finance ministers and central bankers.
At 5 p.m., the dollar was quoted at 120.34-37 yen compared with Wednesday's 5 p.m. quotes of 120.50-60 yen in New York and 120.84-87 yen in Tokyo. During the day, the dollar moved between 120.20 yen and 120.74 yen, trading most frequently at 120.35 yen. It fluctuated narrowly in the upper half of 120 yen most of the day, but picked up at around 2 p.m. and stayed firm in late deals.
"There are high expectations in the market that G-7 may produce something substantial (to support the dollar), and everybody wanted to hold their positions neutral ahead of the meeting," said a dealer at Barclays Bank's Tokyo branch.
"You never know what kind of surprises may come out of the talks. Some even expect that other central banks may join the Bank of Japan (BOJ) in conducting a massive dollar-buying, yen-selling operation," the dealer said.
Players who have overbought the dollar the past three weeks, in line with aggressive market intervention by the Japanese central bank, began to reduce dollar-long positions, notably since Wednesday's New York trading hours, dealers said. Hefty gains in Japan's key stock index Thursday also gave some support to the yen. The 225-issue Nikkei Stock Average shot up 281.25 points, or 2.83%, to close at 10,205.48.
During the day, Teizo Taya, who is among the nine-member BOJ Policy Board, suggested there is no more room for the central bank to further ease monetary policy. But the remark had only a limited impact on the currency market.
"Monetary easing, through attempts to send interest rates lower, has almost reached its limits," Taya told a group of local businessmen in Shizuoka, central Japan. His remarks were closely watched as the Policy Board is scheduled to meet on Oct. 11 and 12.
Shogo Nagaya, a foreign exchange manager at Nomura Trust & Banking Co., said the dollar having recovered most of its losses since the Sept. 11 terrorist attacks gave some players "a modest sense of achievement," which led to some profit-taking sales. The U.S. currency stood at the 121 yen line in Tokyo immediately before the tragedy. It tumbled to 116.33 yen at one point on Sept. 21 before starting to recover. At 5 p.m., the euro was $0.9142-9145 and 110.04-08 yen compared with $0.9135-9145 and 110.15-25 yen at 5 p.m. Wednesday in New York.