/www.ananova.com/ The yen was weaker in late morning, giving up recent gains made on the surprise appointment of the reform-minded Heizo Takenaka as head of the Financial Services Agency, dealers said.
The market remains sceptical that the appointment will by itself alter the government's willingness to deal with Japan's problems and, despite positive words from Takenaka, overseas investors will wait to see action.
The yen also fell against the dollar after yesterday's sharp gains on Wall Street, which only partially fed through to the Tokyo exchange.
"The market was surprised by the news from the Japanese government but (the reaction) was overdone. Takenaka's an ordinary guy," said Hidehiko Inamura, a foreign exchange dealer at Citibank.
"The foreign market players, especially the New York guys, don't believe the Japanese officials," Inamura said.
"They don't understand anything (Finance Minister Masajuro) Shiokawa says, there are no talks between the Ministry of Finance and the Bank of Japan, and Takenaka doesn't have support in the Liberal Democratic Party," he said.
Even if reforms go ahead, the impact on the currency market remains uncertain as the positive result on the economy will take a long time to feed through even as the near-term effects increase risks.
"Maybe it will take a long time for good results. They may issue bonds ... and in that sense, it's a reason to sell the yen because money supply is increasing," Inamura said.
Elsewhere, the dollar firmed against the euro after the sharp overnight gains on Wall Street, as well as weak European data, though the euro benefited against other currencies as downside technical pressure has eased.
"Still we have high volatility in US stocks and maybe the interest rate market but the basic conditions have not changed," Inamura said.
"I think the European economy will go down a little further than the market is expecting. Europe is still a mirror of the US," he said, though adding technical factors could start to assist the euro.
"Up until end-September, there was a huge amount of euro-sell orders. Over the month-end they are significantly reduced ... so the technical side may be lighter," he said.
"If the US market doesn't continue its strong gains, we will see upside (for the euro) in the next few months."
Tokyo 10.50 am New York 5.18 pm London 4.19 pm
Dollar
yen 122.94 up from 122.57 122.57
sfr 1.4903 up from 1.4875 1.4807
Euro
usd 0.9817 down from 0.9831 0.9848
stg 0.6288 up from 0.6276 0.6273
yen 120.69 up from 120.49 120.65
sfr 1.4630 up from 1.4624 1.4580
Sterling
usd 1.5612 down from 1.5664 1.5698
yen 191.93 down from 191.99 192.44
sfr 2.3266 down from 2.3300 2.3245
Australian dollar
usd 0.5438 down from 0.5447 0.5425
stg 0.3483 up from 0.3477 0.3454
yen 66.85 up from 66.76 66.49
© AFX News