28 August 2003, 10:05  Euro takes breather, yen awed by BOJ shadow

TOKYO, Aug 28 - The euro took a breather on Thursday after precipitous falls over the past few weeks as the market noted improvements in euro-zone economic data, while the yen was restrained by wariness over Japanese intervention. The euro was helped by talk mainly among foreign investors that Japan seemed to have conducted yen-selling, euro-buying intervention after warnings the previous day from its forex chief Zembei Mizoguchi about the euro's rapid moves, dealers said. "Many foreign players took Mizoguchi's comments on the euro as a hint that Japan has also been buying euros to stop the yen's appreciation," said Junya Tanase, global markets officer at JP Morgan Chase in Tokyo.
Mizoguchi again talked about the euro on Thursday, saying large swings in the euro/yen rate were undesirable. Downward pressure on the euro subsided after an Ifo business sentiment survey earlier this week and other data suggested that Germany and other European economies that had dipped into recession in the first half of the year may now be recovering. "Given the fundamentals in Germany, France and Italy -- the euro zone's biggest economies -- I wouldn't be surprised if the euro fell further towards parity ($1.00)," said Michihisa Tanimoto, deputy general manager at Sumitomo Life Insurance. "But we've seen some signs of strength in economic data recently, and $1.08 is a technical support level where the market hovered for a while earlier this year."
At 0229 GMT, the single currency was fetching $1.0852/57 , about a half cent above four-month lows set earlier this week. It was trading around 127.48/59 yen , nearly a yen above its recent five-month lows.
The yen's recent advances have been stalled by caution about possible intervention by Japanese authorities, which spent about nine trillion yen ($76.6 billion) in the first seven months of the year to prevent a higher yen from choking off Japan's nascent economic recovery. The Finance Ministry is due to release intervention figures for August on Friday. Analysts expect Japan to have spent one to two trillion yen to hold its currency down in August after selling 2.0272 trillion yen in July. "The current economic recovery and the Nikkei rally owe a lot to the policy over the last few years of not allowing the yen to strengthen beyond 115 yen (per dollar)", Sumitomo Life's Tanimoto said. "If they abandon that policy now, it would raise the question of why did they spend nine trillion yen in the first place and put the policymakers' credibility in doubt." The dollar meandered in tight ranges about a half yen off one-month lows set earlier this week near 117 yen . The Tokyo stock market's Nikkei average <.N225>, which rose to 13-month highs on Wednesday, faltered by midday, helping to reduce upward pressures on the yen for now. The Nikkei finished the morning down 0.25 percent or 25.50 points at 10,283.49.
Still, Finance Ministry data showed early on Thursday that foreign investors were net buyers of Japanese equities last week for the 19th straight week, increasing their purchases to a net 634.5 billion yen from 450.0 billion yen in the week of August 11-15 and 91.1 billion in August 4-8. ($1=117.49 yen)//

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