/www.fxserver.com/TOKYO - The dollar saw little movement in Asia on Thursday morning amid mind-numbing uncertainty over the global economy and financial markets that left most dealers at a loss which way to bet.
"I think we are at a watershed where bulls and bears are competing," said Toshiyuki Aoyagi, foreign exchange manager at Nissho Iwai Corp.
Dollar sentiment remains shaky despite a 1.4 percent rise in the Dow Jones industrial average on Wednesday after five consecutive losing sessions, dealers said.
On the other hand, the mood for the yen was similarly depressed, with a recovery in Nikkei average on Thursday from a 19-month low doing little to allay concerns about the Japanese economy.
With dealers unable to decide which currency was less attractive than the other, rates stayed stuck in a tight range.
As of 11:10 p.m. EDT Wednesday, the dollar was quoted at 118.04/09 yen little changed from its late New York levels around 117.97/05.
That is near the middle of the dollar's recent band between 121.37 and 115.50, and seems a comfortable place for it for now, dealers said.
The euro was also calm at 99.26/29 cents compared to 99.15/20 in late U.S. trade. It was steady against the yen at 117.04/13 yen
ISM INDICES
The dollar was overshadowed by lingering worries over the U.S. economy, ahead of the release of the Institute for Supply Management's non-manufacturing index for August.
Economists surveyed by expect the index, due at 10 a.m. EDT, to rise slightly to 53.6 from 53.1 in July. A reading above 50 indicates improving conditions, while a number below 50 points to a weakening environment.
Still, dealers are mindful that the institute's other big report, covering the manufacturing sector, came in weaker than expected on Tuesday, pushing down the dollar and U.S. share prices.
The market is also bracing for U.S. employment data due on Friday. Economists expect payrolls to have risen by 37,000 jobs in August after an increase of 6,000 in July.
Because consumption has been holding up the otherwise weak U.S. economy, many dealers are worried a deterioration in employment would depress consumption and deal a final blow to the economy.
"The U.S. economy could be in trouble if the employment situation is not good," said a dealer at a trust bank.
BOOK-CLOSING
But dealers also said a weakening in the U.S. economy was likely to hurt other economies, notably Japan, which relies on exports for its fragile recovery.
"At the start of this year, people were expecting a U.S.-led recovery in Japan. Now we could face a U.S.-led recession," said the trust bank dealer.
Japanese shares' recent poor performances has also damaged Japanese banks, which hold a large amount of stocks.
"If the Nikkei is below 9,000, Japanese financial institutions will be in trouble ahead of book-closings at the end of September," said Kota Kimura, assistant manager at Shinkin Central Bank.
Given all the problems in the U.S. and Japan, the euro looked slightly more attractive than the dollar and the yen, some dealers said.
But others were skeptical, saying there are many signs that European economies have been also suffering from the recent downturn in the global economy.
Many dealers expect the major currencies to remain range-bound for the time being, given uncertainty over the world economy.
Some also said any improvement in the U.S. economy could be countered by worries about Washington's possible war plan against Iraq.
Against the yen, the dollar could be also capped by repatriation by Japanese investors ahead of September-end book-closing, they added.
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