TOKYO, June 13 - The dollar was locked in narrow ranges against the euro and yen on Friday, with the market suspecting that Japan was intervening to sell its currency. The greenback was further undermined in New York on Thursday by a mixed bag of U.S. economic indicators, with data showing retail sales rose 0.1 percent in May while initial jobless claims last week fell by 17,000 to 430,000, disappointing some analysts. The dollar fell to a low of 117.45 yen before trading at 117.71/76 yen by mid-morning.
As the dollar's fall has been hampered around 117.40 yen in recent trade, many dealers bet that the Japanese authorities were behind a limited number of Japanese banks constantly bidding for the greenback near that level. "We saw strange bids from Japanese banks near that level in late U.S. hours yesterday," said a Japanese bank dealer. Japan's top financial diplomat, Zembei Mizoguchi, said that the economic environment did not warrant a stronger yen and that Japan would take necessary action in the currency market. Some good news for the authorities is that there was plenty of interest from Japanese retail investors to sell the yen against other currencies, especially high-yielding units like the Canadian and Australian dollars, so they can buy foreign bonds with summer bonuses. Australia's 4.75 percent cash rate is one of the highest in industrialised world, while Europe's 2.0 percent is 75 basis points above that of the United States. The Aussie dollar stood at $0.6646/51 after marking a high of around $0.6665, and is expected to test a four-year high of $0.6710 hit late last week in the near-term.
"People are talking about cross yen buying in relation to new investment trust set-ups, but I don't think such buying will be concentrated on just one or two days," said Takashi Toyahara, forex section manager at Nomura Securities in Tokyo. "I think people are making investment trusts a big deal because there are no market-moving factors now." EURO REGAINS FOOTING The euro was also in a thin range. After dipping to a low of $1.1705 on Thursday, the euro regained some ground after European Central Bank (ECB) officials tempered expectations of further credit easing in the near term, dealers said. The euro stood at $1.1760/65 compared with the late U.S. level of $1.1764/68. "With share prices recovering globally, investors now have strength to take risks. In this situation, they are buying high-yielding currencies, such as the Canadian dollar and the Aussie," said Kosuke Hanao, head of forex sales at Royal Bank of Scotland in Tokyo. "Although the euro may be losing some attraction as a high-yield currency after last week's 50 basis-point rate cut, the euro continues to be solid," he said. The euro stood at 138.42/53 yen compared with the late U.S. level of 138.50/62 yen. On Thursday, ECB Governing Council member Nout Wellink said that based on inflation projections, the ECB expected a recovery in the second half of the year and saw no reason to cut rates further.
Earlier this week, ECB President Wim Duisenberg enticed analysts by hinting that the benchmark euro zone interest rate -- currently at an historic low of 2.0 percent -- could fall further. But over the last two days, Duisenberg has laboured to reverse those remarks, saying that talk of easing is premature. Other ECB policy-makers have followed suit.//