TOKYO, April 28 - The euro held strong near a six-week high on the dollar and four-year peak against the yen on Monday, supported by a steady inflow of funds following weak U.S. growth results and a slump in Japanese shares. But the dollar regained some support versus the yen due to yen-selling in the cross market by Japanese investors, who were hunting bigger returns by buying foreign bonds with relatively high interest rates, dealers said. The greenback had slumped to a session low of 119.85 yen on the unwinding of long positions after the dollar dropped sharply from a high of 121.15 yen on Friday. As of 0314 GMT, the dollar was quoted at 120.09/14 yen compared with Friday's late New York level of 120.27/32.
"The dollar was undermined by weak GDP data, but against the yen, people were very careful about selling (the dollar) too heavily on North Korea and uncertainty over SARS," said Hideaki Furumaya, head of the interbank desk at Trust and Custody Services Bank. "It seems players outside Japan are growing increasingly worried about the impact of SARS on the economy especially in Asia and Japan, giving them an excuse to sell the yen."
U.S. FUNDAMENTALS
The dollar was under pressure against European currencies after U.S. first-quarter gross domestic product (GDP) came in at 1.6 percent, marginally up from the fourth quarter's 1.4 percent. Analysts had looked for around 2.3 percent. The euro stood at $1.1050/55 against the late New York level of $1.1034/40. Steady yen-selling by Japanese investors also pushed the single currency to a session high of 132.88 yen , but it was capped by resistance around 133 yen. The euro was quoted at 132.73/85 yen compared with 132.79 in late U.S. trade. The yen was undermined as the Nikkei average <.N225> hit a fresh 20-year low, dragged down by steep falls in bellwether Sony Corp <6758.T> following shock earnings last week.
The Nikkei finished the morning down 0.60 percent at 7,652.95 after falling as far as 7,623.15, below the previous two-decade intraday low of 7,660.62 marked on Friday. "North Korea and SARS are putting psychological pressure on the yen," said Takashi Toyahara, forex section manager at Nomura Securities. "Also having seen the dollar capped above 121 yen, dealers are choosing the strategy of going short on the yen against the cross currencies." Activity was generally thin as Tokyo traders were sidelined ahead of a market holiday on Tuesday, with many Japanese manufacturers away for the "Golden Week" holidays from late April to early May. In the near term, the market is focusing on a series of U.S. economic data due later this week, including consumer confidence and employment indicators, as well as Federal Reserve Chairman Alan Greenspan's speech before Congress.//