TOKYO, Oct 30 - The dollar was under pressure against the yen on Thursday as caution ruled ahead of U.S. Treasury Secretary John Snow's testimony before the Senate later in the day. After moving in a tight band for most of the day, the dollar hovered near the day's low of 108.05 yen as of 0630 GMT. That was down from 108.30 yen in late U.S. trade but above the three-year low of 107.86 hit in early London trade on Wednesday. Although the greenback was weighed down against the yen by speculation that Snow would criticise Japanese intervention, few traders were ready to sell aggressively, believing the Japanese authorities would step in again to prop up the dollar. "I think the market has been excessively nervous about Snow," said Tomoko Fujii, market economist at Nikko Citigroup in Tokyo. "For the United States, economic recovery in Japan is a top priority, so it's hard to think that Snow will say something extreme and pour cold water on Japanese authorities' attempt to weaken the yen," Fujii said. According to market sources, Japan intervened in the foreign exchange market from early Tuesday to late Wednesday. Many traders say the Bank of Japan probably bought the dollar around and below 108 yen when it was hitting new three-year lows. Snow's testimony is due around 1500 GMT. Thursday will also see U.S. gross domestic product data for the third quarter, due at 1330 GMT, which economists expect to show strong growth of six percent or more. The euro was at $1.1666/71 , slightly up from $1.1660 in late U.S. trade. Against the yen, the euro was at 126.12/17 yen , little changed from late New York.
DOLLAR UP AFTER SNOW?
Snow's testimony is drawing attention amid speculation that he may condemn Japanese intervention and China's dollar-peg for the yuan, which would be a harsher position than his usual mantra that markets should determine currency values. Traders said such criticism would make it harder for Tokyo to intervene aggressively to stem the yen's strength. Japan has sold more than 13.5 trillion yen ($124.8 billion) so far this year in the forex market, fearing a rise in the yen will squeeze exporters' profits and derail a fragile economic recovery. The dollar has declined for several months on the belief that Washington is seeking a weaker dollar -- despite its official strong-dollar policy -- to help its exports and to curb a growing U.S. current account deficit. Its fall accelerated after the Group of Seven (G7) leading industrial countries met in September, as the group's statement calling for flexible foreign exchange was interpreted as criticism of Japan's intervention. Still, some traders say the yen could be sold after Snow's testimony, thinking that any negative comments about Japanese intervention may have already been factored into the currency. "Most market participants expect the dollar/yen to ease further if Snow does say something negative about Japanese intervention, but we have to be careful, the dollar could actually shoot up," said Mitsuru Sahara, vice president at UFJ Bank's forex dealing group. "As the dollar short position is getting quite large now, we could see typical buy-on-rumour, sell-on-fact moves after Snow's comments," he said.//