TOKYO, Oct 17 - The dollar was glued to tight ranges on Friday as the market waited to hear what U.S. President George W. Bush had to say on currencies when he meets Japanese Prime Minister Junichiro Koizumi in Tokyo. Bush, due to arrive in the Japanese capital later in the day, sent the dollar tumbling earlier in the week when he said the value of currencies should be determined by markets, which traders read as a criticism of Japan's repeated yen-selling intervention. At the same time, Bush expressed support for a strong dollar, but many in the market considered the comment as merely lip service to a discarded policy. Most traders expect Bush to stick to the same rhetoric in Tokyo. "The two elements are contradictory, since leaving it to the market would mean an approval of the dollar's steep fall (against the yen)," said Katsunori Kitakura, manager of the treasury department at Chuo Mitsui Trust and Banking. "If he says both, I think the market will gradually push up the yen," he said.
BOOST FOR KOIZUMI?
Some players said that Bush could surprise the market by giving Japan some leeway on intervention and providing a boost to Koizumi, who faces a general election in November. "If he says he understands Japan's concerns over the yen's rise, the dollar will be bought back," said Takashi Toyahara, forex manager at Nomura Securities. Japan's interventions are aimed at curbing the yen's rise versus the dollar, seen as harmful to the nation's export-led economic rebound. Despite heavy Japanese intervention, the dollar has dropped around 10 percent in the past three months, from above 120 yen. The fall accelerated after the Group of Seven leading industrial nations called for flexibility in foreign exchange rates following its meeting last month. Reflecting recent strong demand for the yen, Ministry of Finance data showed on Friday that foreign investors poured a record 809.4 billion yen ($7.37 billion) of funds into Japanese stocks and bonds in the week that ended last Friday. As of 0523 GMT, the dollar was steady at 109.83 yen , flat from late U.S. trade. It was briefly dragged down as a major U.S. operator sold the euro for yen. The euro fell more than half a yen to under 127 yen, before edging back up to 127.46 yen.
The single currency was little changed versus the dollar at $1.1602. After stopping over in Japan, Bush will fly to Bangkok for the October 20-21 Asia-Pacific Economic Cooperation (APEC) summit, where he will meet Chinese President Hu Jintao. Bush has said he would press Japan and China at the APEC meeting to loosen up their currency policies as a way to lower trade barriers. "If he does that, it would weigh on east Asian currencies, including the yen," said Kitakura of Chuo Mitsui.//www.reuetrs.com