TOKYO, Oct 14 - The dollar swept to a one-week high versus the euro and firmed against other major currencies on Tuesday, helped by Wall Street's latest rally. The dollar's rise against the euro started on Monday after European Central Bank President Wim Duisenberg said a Group of Seven (G7) call last month for exchange rate flexibility was not directed at the euro. The G7 statement was widely perceived as a demand that Asian countries, which are largely dependent on exports, let their currencies rise, but the subsequent weakness in the dollar also boosted the euro. "I don't think what Duisenberg said was anything new. The market's position was tilted towards the euro and so I think the fall was an adjustment," said Junya Tanase, foreign exchange strategist at JP Morgan Chase. Last week, the euro rose to within one cent of its record high of $1.1932 hit earlier in the year. Many traders think euro long positions had accumulated to the extent that an adjustment was inevitable.
But some traders took Duisenberg's comments as a sign that European policymakers were unhappy with the euro's rise and were ready to rein it in. On Tuesday the euro fell more than a full U.S. cent to a one-week low of $1.1583 versus 1.1712/16 in late U.S. trade Monday, when it also fell nearly one percent. As of 0553 GMT, the euro was trading at $1.1618/23 . It slipped to around 127.04/15 yen compared with 127.45. The greenback also rose to 109.39 yen , more than a third of a percent above 108.90/00 in late U.S. trade, and more than one yen above a three-year low of 108.28 yen on Friday. The dollar also rose to one-week highs against the Swiss franc at 1.3355 franc , gaining more than one centime, and against the Australian dollar at 68.29 per U.S. dollar. "New York shares were also strong, and that prompted an adjustment of recent excessive weakness in the dollar," said Seiya Nakajima, chief economist at Itochu Corp. The Nasdaq Composite Index <.IXIC> on Monday jumped to its highest close in more than 20 months after surprisingly rosy results from mobile phone maker Motorola Inc boosted investors' hopes for strong third-quarter earnings. The blue-chip Dow Jones Industrial Average <.DJI> posted its highest close since June, 2002.
FOCUS ON BUSH VISIT
Against the yen, the dollar was also helped by wariness about Japan's yen-selling intervention to curb the yen's export-hurting appreciation. But traders noted uncertainty about Japan's forex policy ahead of Bush's visit to Japan on Friday. Bush is expected to discuss currencies when he meets Japanese Prime Minister Junichiro Koizumi. If Bush preaches the virtues of forex flexibility, that would be taken as indirect criticism of Japan's intervention and would lift the yen against the dollar. On the other hand, Bush may say he believes in a strong dollar. That would be a shot in the arm for Tokyo's efforts to curb the yen's strength and traders think Bush may make such a comment possibly in exchange for a sizable donation -- possibly in the billions of dollars -- from Japan to help rebuild Iraq. "In general, market players are well prepared for a further rise in the yen," said Takashi Toyahara, forex manager at Nomura Securities. "So, if there is to be a surprise, it will be a rise in the dollar," he said.//