By John Hardy
Dow Jones Newswires
NEW YORK -- With the market torn over the near-term direction of major currency pairs, the dollar traded within established ranges, slipping a touch lower against both the euro and the yen. The market continues to focus primarily on the yen, which remained firm despite overnight efforts by the Japanese authorities to talk it down in hopes of reversing last week's sharp gains.
And, some analysts now backing the yen to show further strength before becoming exposed to renewed selling pressure. "I don't rule out dollar/yen testing major support at 125 yen" said Ashraf Laidi, chief currency analyst at MG Financial in New York, "I don't think we've seen the end of the decline."
But this view is by no means universal, with other strategists expecting the dollar to quickly push back toward 130 yen, preparing to resume its long rally against the yen as soon as repatriation flows cease to underpin the currency -- at the end of Japan's fiscal-year on March 31. The euro saw little action all day, trading quietly between an intraday low of 87.35 U.S. cents and a high of 87.70 cents, which to traders confirmed the single currency's limitations. "It suggests that the euro rally [last week] wasn't credible, as it failed to hold above 88.20 cents," said Mr. Laidi, who also feels that recent signs of upward pressure on international oil prices will add to the euro's woes. "We have to watch the impact of oil prices weighing on the euro," he said. But, there was a modest vote of confidence in the single currency yesterday, in a broadcast interview by Bundesbank President Ernst Welteke. "We expect that, in the course of this year, [euro zone] inflation will return below 2%, and the external value of the euro would then rise somewhat," Mr. Welteke said.
Late yesterday in New York, the euro was at 87.53 cents, up from 87.41 cents earlier in London and above 87.40 cents Friday in New York. The dollar was at 128.36 yen, down from 128.95 yen earlier in London and from 128.53 yen Friday in New York. The dollar was at 1.6797 Swiss francs, down from 1.6864 francs Friday, while sterling was at $1.4205, down from $1.4212. In the U.S., economic data had little market impact, with wholesale inventories falling 0.2% in January after a 0.5% decline in December, slightly better than the consensus expectation. In Tokyo trading, comments from Zembei Mizoguchi, the head of the Japanese Ministry of Finance's International Bureau, had given the dollar a modest boost, pushing dollar/yen to make an intraday high at 129.18 yen. Mr. Mizoguchi said that "sharp movements aren't appropriate" in the currency market and that authorities are ready to take "various steps" whenever necessary. And, Toshiro Mutoh, Japan's administrative vice finance minister, amplified the message, saying that "last week's movements were too rapid," and that the ministry "will take appropriate steps if needed." But, new data yesterday showed that Japan's economy remains in terrible shape, with the dollar benefiting from short covering after the government announced that core machinery orders plunged a steep 15.6% on the month in January -- the largest one-month drop on record. But the dollar's gains proved short-lived, with the currency slipping back as far as 127.79 yen in the New York session. Elsewhere, Argentina's peso was lower as companies and investors increased their orders for U.S. dollars. The peso closed at 2.28 pesos to the dollar, compared with Friday's close at 2.2450.