TOKYO, Oct 6 - The dollar pushed above 111 yen on Monday after last week's surprisingly strong U.S. jobs data prompted traders to revise their overwhelmingly bearish sentiment on the greenback. Some analysts also said the market might be coming to respect -- at least for now -- a line in the sand the Japanese authorities drew at 110 yen by intervening loudly through the U.S. Federal Reserve last week to support the greenback. "The dollar's weakness last week was based on speculation about two things -- that Japan won't be able to aggressively intervene in the wake of the G7 communique and that the U.S. was opposed to Japan's intervention," said Toru Umemoto, currency strategist at Morgan Stanley.
"But Japan has continued to intervene and stopped the dollar's fall, and they did it through the Fed. Plus we got those payroll figures. So the momentum seems to have abated and I would expect a relatively quiet week ahead." The Group of Seven (G7) industrialised nations, in a statement on September 20th, called for more flexibility on exchange rates. As of 0207 GMT, the dollar stood at around 111.11/12 yen , slightly above 110.87/95 late in New York on Friday and about one percent off last week's three-year lows. The euro had eased to $1.1554/57 , compared with 1.1577/83 in late U.S. trade. LIMITED RECOVERY SEEN U.S. non-farm payrolls rose 57,000 in September compared with a consensus forecast for a loss of 30,000. But many traders were still betting that the dollar would remain fragile and that a strong recovery was unlikely. "The payroll figures were a surprise but the dollar's rebound has not been spectacular," said a dealer at a Japanese bank. "The market need not be overly pessimistic about the U.S. economy but that doesn't mean we can say the dollar's bearish trend has reversed." Osamu Takashima, technical analyst at Bank of Tokyo-Mitsubishi, said though the dollar may continue to rebound this week but its rise would be capped around 112 yen. "I think it would be difficult for the dollar to recover above the four-week moving average around 112.25 yen," he said. "The downside risk for the dollar still remains." Furthermore, worries about Mideast stability weighed on the dollar, particularly as recent polls showed slipping support ratings for U.S. President George W. Bush. On Sunday, Israel launched its deepest air raid into Syria in 30 years, attacking what it said was a training camp for Palestinian militants after a suicide bomber killed 19 people in an Israeli restaurant.
Bush is due to visit Japan next week, where he is expected to receive a show of support from Japanese Prime Minister Junichiro Koizumi about Washington's efforts to rebuild Iraq. Traders said such political consideration would probably keep the dollar/yen exchange rate from becoming a major topic at the bilateral meeting, although Bush vowed in a speech on Friday to press other countries to adopt currency policies that offered a "level playing field" for American companies.//