TOKYO, Sept 16 - The dollar fell by midday on Tuesday, undermined by U.S. data that raised doubts about the strength of the current economic recovery in the United States. Japanese Finance Minister Masajuro Shiokawa's decision to cancel his trip to Dubai where a Group of Seven meeting is scheduled later this week and comments suggesting that he may not stay at his post had little impact on the currency market. The dollar's losses were relatively subdued, with many market players waiting to see how the Federal Reserve -- widely expected to keep rates unchanged at its policy meeting on Tuesday -- will assess the state of the U.S. economy.
Against the yen, the greenback found some support due to wariness about Japan's dollar-buying intervention. As of 0246 GMT, the dollar was at 117.16/21 yen , down from around 117.50 yen in late U.S. trade. Traders said gains in Japanese share prices also helped the yen. The Nikkei share average <.N225> ended the morning up 0.42 percent at 10,758.33. The euro rose to $1.1302/05 from late U.S. levels around $1.1285. The common currency was at 132.40/51 yen , compared with 132.60 yen. Shiokawa, who has been sidelined due to illness, said it was not urgent that he attend the G7 meeting given that he shared the same views as U.S. Treasury Secretary John Snow on international currency regimes.
The finance minister also said he had no plan to resign although his recent illness might make it difficult for him to stay on in his job. "It will take me time to build up my stamina," he told his first news conference following hospitalisation for gall bladder inflammation. "It could be difficult to carry on." He added that he would leave the decision on whether he continues in his post up to Prime Minister Junichiro Koizumi. Koizumi is expected to reshuffle his cabinet next week assuming he wins an election for party leader on September 20 and retains his prime ministership. The currency market showed muted reaction to Shiokawa's remarks. "We're not seeing any significant moves," said Gen Kawabe, treasury department manager at Chuo Mitsui Trust and Banking. "Many market players see Koizumi's reelection as a yen positive factor but Shiokawa's resignation would not lead to thinking that his structural reforms will be delayed."
EYES ON FED
Hopes for a strong recovery, which led the dollar's rally from April to June, are now facing a reality check, as recent data showed lethargic U.S. labour markets hardly benefitted from a recent upturn in the economy. Concerns over the U.S. economy pushed down the dollar versus the Australian dollar, which rose to 66.59/64 U.S. cents from around 66.50 and threatened to mark a fresh seven-week high. For now, though, the market is focusing on the Fed's policy-setting meeting. The U.S. central bank is expected to leave official interest rates unchanged, but Wall Street will be closely watching the Fed's view of recent economic growth, which some believe may not last into next year. The Federal Open Market Committee, which sets interest rates, will release a statement at 1815 GMT. Japanese officials, meanwhile, reiterated their intention to curb the yen's strengthening. Japan's forex chief, Zembei Mizoguchi, said on Tuesday that any action Japan takes in the foreign exchange market is aimed at preventing volatility and overshooting. Mizoguchi also shrugged off speculation that other Group of Seven countries may urge Japan to curb its intervention at their weekend summit in Dubai, by saying he saw no need to explain Japan's currency position further at the meeting.//