TOKYO, April 9 - The dollar struggled against most other major currencies on Wednesday, with expectations of a quick end to war in Iraq undermined by worries that the U.S. economic outlook may not be very promising even after the war ends. Against the yen, however, the greenback recovered slightly, supported indirectly by broad yen selling flows against European currencies and the Australian and Canadian dollars. Dealers said such yen selling against European currencies was seen as fresh investment abroad by Japanese. "The market has started pricing in the postwar economic situation in the United States, and many are seeing the dollar's downside," said Naoya Murata, vice president at the forex dealing group at UFJ Bank. "But against the yen, the dollar is well-supported today due to bids in cross-yen trade, which are related to fresh foreign bond investment by Japanese institutional investors," he said.
The euro rose to 128.97/04 yen from 128.42 in late Tuesday U.S. trade. The Australian dollar also rose to 72.30/40 yen versus 71.97/07 yen, and the Swiss franc edged up to 86.72/77 yen from 86.38/43 yen. The greenback was at 119.89/94 yen , steady from 119.85 in late U.S. trade, having risen to a session high of 120.15 yen. But it fell against other currencies, standing at $1.0752/57 per euro versus $1.0712 in late U.S. trade on Tuesday.
BACK TO BASICS
While Japanese money flows are expected to lend the dollar support in the near term, dealers said they had also seen sizable sales by Japanese exporters and foreign accounts above 120 yen. "A growing number of people are starting to think the dollar's recovery will be limited. People are looking at the two deficits (budget and current account) in the U.S.," said Shogo Nagaya, currency manager at Nomura Trust and Banking Corp. Traders say rapid U.S. progress in the war, once seen as synonymous with a quick recovery in the U.S. economy, now appears to be losing the leverage to lift the dollar and U.S. shares.//