22 March 2002, 09:22  Forex - Dollar top-heavy in midafternoon Tokyo on US forex policy concerns

TOKYO (AFX-ASIA) - The dollar was top-heavy against the yen in midafternoon trade due to concerns over the sustainability of a strong dollar policy in the US, dealers said. The National Association of Manufacturers and the AFL-CIO have jointly called the Bush administration to shift its strong dollar policy. However, Treasury Department spokesman Tony Fratto said the US government's strong dollar policy remains unchanged. "As Secretary O'Neill has said in the past, we have a strong dollar policy, it's constant, it's consistent, and there's no change in policy," Fratto told reporters. Bank of Yokohama foreign exchange assistant manager Hiroshi Ishihara said local market players are eagerly waiting to see how European players respond to the joint call from the US manufacturers and the comments from the US Treasury Department. "Despite the growing pressure from manufacturers, however, the US government is not likely to announce openly a shift in the policy, given the experience that the previous shift in the foreign exchange policy caused sharp rises in long-term interest rates there," he said. The dollar, however, is expected to remain solid against the yen in the next week thanks to disappointment over policy management by the Japanese government, dealers said. "There is no better additional measure than (an early passage of) the budget" for next year, Prime Minister Junichiro Koizumi said in South Korea. His comments came four days after the Liberal Democratic Party policy head Taro Aso urged the government to take further measures to combat deflation, warning the recovery in the stockmarket would lose steam without it. "Such remarks will not help increase capital inflows into the Japanese markets," Ishihara said, adding that the US currency is likely to move firmly in the 131-134 yen trading range next week on improved supply and demand conditions.

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