SINGAPORE, Nov 3 - The U.S. dollar firmed past 110 per yen on Monday as the market worried about its exposure to the Japanese currency amid signs that a U.S. economic upswing was gaining strength. Trade was thinned by a holiday in Japan, Asia's largest foreign exchange market, but the dollar retained its upbeat tone from Friday, trading near one-week highs on the yen and two-week highs on the euro. Strong third-quarter U.S. growth data, improving consumer confidence and regional manufacturing activity gave the dollar a leg-up on Friday, and it was expected to remain supported ahead of October employment data at the end of this week. "The U.S. dollar is seeing a bit of a cyclical tailwind as a result of that, but secondly the market I think has got a little bit spooked about the level of positioning in yen in particular," National Australia Bank strategist Michael Jansen said. "There is a view that the yen is due for a technical correction, mostly because the momentum is really fading to the downside." In mid-morning Asian trade, the dollar had risen to around 110.10 yen from 109.88 late in New York. The dollar was little changed against the euro , holding around $1.1580. Against the commodity currencies, however, the dollar's gain was far less impressive as it is faced with the prospect of rate hikes in Australia and New Zealand, which is keeping both currencies near six-year highs against the greenback.
SPECULATIVE POSITIONS
IMM data on Friday showed the speculative market had established its largest net long-yen position since the Commodity Futures Trading Commission started compiling the data. In the week to October 28, the net long-yen position rose to 54,910 contracts from 48,304 the previous week. That made the yen vulnerable to any shift of sentiment, and traders said the strong U.S. GDP and the lack of sharp criticism of Japanese intervention from U.S. Treasury Secretary John Snow last week saw the market start to pare back positions. On Friday, figures showed Japan's Ministry of Finance had sold 2.723 trillion yen ($25 billion) in October to stop the yen rising sharply, after spending a record 4.4573 trillion yen in September. "What they have been forced to do is spend a truckload just to keep it (the dollar) from falling. That's why the IMM positions are so long, because the Bank of Japan is just buying off the specs," Jansen said. Key support for the euro was put at $1.1550, a breach of which could see the euro retreat to near where it was trading before the Group of Seven meeting on September 20. There was talk of options positions protecting $1.1550, but they were thought to be expiring this week and the improving growth outlook in the United States was expected to keep the euro on the defensive in the near term. "With the unexpected strength of U.S. third quarter GDP, and improving prospects for business investment and inventory accumulation, investors are now marking up growth prospects and reconsidering short U.S. dollar positions," Barclays Capital strategists said in a report. Key U.S. data this week includes manufacturing data on Monday and non-farm payrolls data on Friday. Employment is forecast to have risen 55,000 in October, a second successive monthly rise.//